Most businesses spent money on new set assets and shelling out for fixed resources is capital expenditure. This is shelling out for new resources to replace worn-out possessions or obsoletes. This could also be shelling out for existing set of resources to boost security features. That is spending to expand the business, to make new products, open new outlets, and invest in development and research. This is an investment appraisal technique that considers both timing of cash flow and total cash flows within the project’s life. That is predicated on future cash flows and not accounting profit. DISCOUNT FACTORS AND DISCOUNT TABLE.
A present value for another cash flow is calculated by multiplying the near future cashflow by one factor. NB. To calculate a present value for cash moves you multiply the near future cash flow by the correct discount factor. Any cash moves that happen “now” (in the beginning of the project) happen in the entire year 0. The discount factor for a 0 is 1. 0 of what cost of capital is regardless. NPV is the value obtained by discounting all cash inflows and outflows at the cost of capital.
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It’s the amount of today’s value (PV) of all the cash inflows from a project without the PV of all cash out flows. …