Understanding Net Present Value

Front

What is the future value of $100 invested at an expected 20% annual return after one year?

Back

$120

Front

How do you calculate the present value of $120 expected one year from now at a 20% annual return? Options: Multiply $120 by 1.2, Divide $120 by 1.2, Multiply $120 by 0.8, Divide $120 by 0.8

Back

Divide $120 by 1.2

Front

What is the formula for future value given a present value, rate of return, and number of years?

Back

Front

What is the present value of $400 expected two years from now at a 20% annual return?

Back

$278

Front

Back

$35

Front

What does the "Net" in Net Present Value mean?

Back

Deducting the investment amount from the present values of future cash flows

Front

If the Net Present Value of a project is negative, what should be done?

Back

Reject the project proposal

Front

What is the present value of $400 expected three years from now at a 20% annual return?

Back

$231

Front

How is the Weighted Average Cost of Capital (WACC) used in NPV calculations?

Back

As the rate of return for future cash flows

Front

What is the main idea of Net Present Value?

Back

Time is money, and future cash flows are translated into today's money