A) How can NPV be used in personal life? Elaborate and explain.
B.) If you think of the term theoretically you have to come to realize that it is implied or existing only in theory and it is not practical, and speculative which is the terms used by dictionary.com. Because net present value is the theoretically correct method it is not practical for most practitioners. Net present value of cash inflows equals the initial investment and IRR is the amount of return if the firm continues to invest and receives the the given cash inflows. Net present value is just that, the net present value when you calculate NPV and then depress the IRR you get the actual internal rate of return. Net Present Value, which is figured out by taking the value of the cash inflows and take out the initial investment. The IRR equates the NPV equal to zero so that the inflows and outflows are being measured to the actual flow of money. I believe that because IRR is the practical view in which businesses âthink in terms of rates of return rather than actual dollar returns. It takes into account the benefits of the investment where NPV does notâ (Gitman, Zutter, 2015), and that is why the differences exist.
What are your thoughts? elaborate/explain.
A) How can NPV be used in personal life? Elaborate and explain.
B.) If you think of the term theoretically you have to come to realize that it is implied or existing only in theory and it is not practical, and speculative which is the terms used by dictionary.com. Because net present value is the theoretically correct method it is not practical for most practitioners. Net present value of cash inflows equals the initial investment and IRR is the amount of return if the firm continues to invest and receives the the given cash inflows. Net present value is just that, the net present value when you calculate NPV and then depress the IRR you get the actual internal rate of return. Net Present Value, which is figured out by taking the value of the cash inflows and take out the initial investment. The IRR equates the NPV equal to zero so that the inflows and outflows are being measured to the actual flow of money. I believe that because IRR is the practical view in which businesses âthink in terms of rates of return rather than actual dollar returns. It takes into account the benefits of the investment where NPV does notâ (Gitman, Zutter, 2015), and that is why the differences exist.
What are your thoughts? elaborate/explain.
