MGT 181 Chapter Notes - Chapter 9: Payback Period, Cash Flow, Net Present Value
6 May 2019
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An investment is worth undertaking if it creates value for its owners. Costs more in the marketplace than what it costs us to acquire it. Like when you flip a house, for example. The difference between an investment"s market value and its cost. The process of valuing an investment by discounting its future cash flows. When trying to see if starting a business is a good idea, things get a little more complicated than just comparing things in the marketplace. Estimate the expected future cash flows and then find the npv. Difference between present values of future cash flows and the cost of investment. Put the cash flows into the calculator, put in the rate of return you expect (associated with risk), then hit npv. An investment should be accepted if the npv is positive and rejected if it is negative.
