First step in calculation of net present value is to find out_________?
Correct answer: C. Present value cash flow
- A. Present value of equity
- B. Future value of equity
- C. Present value cash flow
- D. Future value of cash flow
Explanation
NPV compares the present value of expected future cash inflows with the initial investment, so the calculation begins by discounting the future cash flows to their present value. Equity values are not the starting measure in a project NPV calculation.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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