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FIN 301 Module 4 Discussion: Net Present Value (NPV)

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Module 4 Discussions
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Locked before Monday, October 19, 2015 12:00 AM PDT 
7 Unread Posts (7 total) - 1 topics Hide Topics 
Last post 13 hour(s) ago by Dr. Jaichand Sewkarran
Net Present Value 
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How accurate do you think a company's estimates of the net present value of a proposed project are? Refer to both the initial investment and to the components of the cash flow: revenues, operating expenses, depreciation, taxes, and the cost of capital to use for the computation of the present value. 
Keep in mind that NPV is the value in today's dollars of cash flows to be received some time in the future minus what we have to pay today to get those cash flows. 
Which of the following do you think would give you the most accurate NPV calculation: (a) a brand new retail startup (b) a pharmaceutical company introducing a new drug (c) a company with a successful product in Chile trying to introduce it to the USA.
Do research on the Internet and show the reference for the information. Don't forget to respond to a colleague's posting also.
Professor’s Note: In addition to searching the Internet for text related to this threaded discussion, please watch the following videos (click on the following link to access these videos) and post your comments. 
http://www(dot)youtube(dot)com/watch?v=jylJ2r9bklE Episode 99: How to Calculate Net Present Value
http://www(dot)youtube(dot)com/watch?v=uNcBWALtLHU What is NPV?
Grading Criteria: Try to add information not previously discussed by others. Please, provide factual information (not merely opinions) backed up by details or examples. 
Your comments should be in your own words and include references. 

Essay Sample Content Preview:

Module 4 Discussion FIN 301
Student’s Name
Institutional Affiliation
Net Present Value (NPV)
NPV is a calculation that compares today’s investment to the present value of future cash flows from that investment. The future cash flows are being discounted by a particular rate of return. NPV is calculated by accountants after identifying all the future cash flows of the investment using the formula below:
Where
Ct= net cash inflow during the period
Co= total initial investment cost
r= discount rate
t= number of periods
If a positive NPV is found, then the projected earnings exceed the initial investments, and it is deemed viable. A positive NPV is considered to be profitable while a negative NPV will result in a net loss. This concept of positive and negative NPVs forms the basis of NPV Rule that say...
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