The 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 calculation begins by discounting each future cash flow to its present value, after which the initial investment and discounted inflows are combined. Therefore, present value cash flow is the first calculation listed.
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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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