Chapter 8. Evaluating Investments by Using Net Present Value Criteria
Questions answered in this chapter:
What is net present value (NPV)?
How do I use the Excel NPV function?
How can I compute NPV when cash flows are received at the beginning of a year or in the middle of a year?
How can I compute NPV when cash flows are received at irregular intervals?
Consider the following two investments, whose cash flows are listed in the file NPV.xlsx and shown in Figure 8-1.
Investment 1 requires a cash outflow of $10,000 today and $14,000 two years from now. One year from now, this investment will yield $24,000.
Investment 2 requires a cash outflow of $6,000 today and $1,000 two years from now. One year from now, this investment will yield $8,000.
Which is the ...
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