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Net Present Value

Net Present Value is capital budgeting criterion, which compares the present value of cash inflows of a project discounted at the risk-adjusted cost of capital to the present value of investment outlays discounted at the risk-adjusted cost of capital.


Net present value used in capital budgeting and is the sum of the present values of the future cash flows minus the cost of the project. A positive net present value represents an increase in value for the fi rm.

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