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Net Present Value (NPV) is the PV of the stream of future Cash Flow (CF) from a project minus the project’s net investment.
NPV = CF0 + CF1*(1+k)^1 + CF2*(1+k)^2 + CF3*(1+k)^3 + CF4*(1+k)^4
Internal Rate of Return (IRR) is the discount rate at which NPV is zero.
CF0 + CF1*(1+IRR)^1 + CF2*(1+IRR)^2 + CF3*(1+IRR)^3 + CF4*(1+IRR)^4 = 0
Please find calculations HERE
NPV_S = $10016.81
NPV_W = $19982.78
IRR_S = -15%
IRR_W = -13%
For Mutually exclusive investments - the project with the largest NPV should be recommended.
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