Question

The npv function is used in calculating the net present value of a transaction, which is the _______ value of all the cash inflows and outflows in the investment adjusted by the time value of money

Answer 1

This is the current value of cash inflows. NPV helps determine the net present value of opportunities (such as whether or not company A's investment is better than company B's investment, or if one should take Project 1 over Project 2). NPV must take into account budgeting aspects into its calculation.