NPV

Discounts the cash flow by the cost of capital The cost of capital includes interest foregone, inflation, the risk premium of the investment example ...............................................DF 15% Investment Yr 0 (150).....................1......................(150) Year 1 CF 30.....................0.87......................26 Year 2 CF 30....................0.756.....................22.68 NPV (101.32)

Good because it

• Includes all cash flows
• takes in to account the timing of cash flows
• looks at actual cask not a percentage unlike IRR
• Deals with risk
• Deals with Opportunity Costs
• Any positive NPV is accepted

ARR IRR Payback

Annuity Tables can only be used if the constant