Understanding Net Present Value (NPV) in Investment Appraisal

The video tutorial explains the concept of net present value (NPV) and its significance in investment appraisal. It highlights how NPV accounts for the timing of cash flows and profitability over an investment's lifetime by discounting future cash flows to present value. The tutorial details the formula for calculating present value and how businesses use NPV to assess investment projects. It also discusses the advantages of NPV, such as combining payback period and average rate of return, and the challenges, including data accuracy and market changes.

Describe the relationship between net present value and the initial cost of an investment.

What factors can affect the accuracy of net present value calculations?