Banking Exam Question - What is Net Present Value? How to Calculate NPV? Advantages and Disadvantages of NPV

Introduction - Net Present Value (NPV)

In any project, the cash flow in any year has been removed from Discount and the total current value is deducted and the net cash outlay is declined, which is called the current value itself.

Formula:
Net present value = Total present value - Net cash outlay

• If this is NPV positive then the project is selected and the NPV negative is rejected.
• The NPV plans should be given priority first and the NPV project should be kept behind.

Advantages

• Compare the investment amount over time.
• Pay attention to the cash flows throughout the planning period.
• Analytical study of both benefits and risks.
  

Disadvantages

• It's awesome to use.
• It is believed that the default will be.
• Disadvantages of unmanned projects will cause difficulty in the project.