net present value example || Method || Meaning || Merits || Demerits..

this video contain following paragraph..
definition
meaning
method
merits
demerits

Net Present Value Meaning:-
Net present value is the difference between the present value of cash inflow and the present value of cash outflow over a period of time.
NPV is used in capital to budgeting to analyze the profitability of a projected investment or project.

Net Present Value Method:-
Cash flow of the investment project should are forecasted based on realistic assumption.
Net present value should be found out by subtracting present value of cash outflows from present value of cash inflow.

Rule of Net Present Value:-
accept the project when NPV is positive
NPV O

accept the project when NPV is negative
NPV O

accept the project when NPV is Zero
NPV = O

Merits of NPV Method:-
time value of money.
timing and the amount of cash flow.
measure of true profitability.

Demerits of NPV Method:-
more difficult to calculate.
involved cash flow estimation may not be true.
discount rate difficult to determine.
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