Net present value - part 1
Taught by Nick Drape · AI tutor support included
You'll learn how net present value works as a project appraisal technique and why it's the superior method for evaluating investment decisions.
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In this lesson
- 0:00 What is net present value?
- 1:02 Discounting cash flows explained
- 2:35 NPV decision rule and project selection
- 3:41 Worked example: perpetuity valuation
- 6:32 Staged investment with delayed annuity
- 10:31 Interpreting NPV results
About this lesson
This video covers the core principle of discounting cash flows back to present value terms, the decision rule (accept if NPV is positive, reject if negative), and how NPV represents the change in business value and shareholder wealth. You'll work through two practical examples: a perpetuity investment and a staged investment with delayed annuity cash flows, learning how to apply discount factors and annuity factors to calculate NPV accurately. This is essential knowledge for FM, AFM, and other papers where investment appraisal is tested, and it's a technique you'll use throughout your career in real business decisions.
Duration: 11m
Transcript
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