ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I know how to work out NPV,
just dont know how to tell if its a positive or negative!!! :shock:

Thanks!!!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    hiya just remember when you've taken initial outlay say £100k away from cash inflows(money made from the project) lets say 70k which would mean we spent 100k but only made 70k we've lost 30k so its negative.we need to have inflows of cash (money earnt) of a greater value than the cost of the investment to have a positive npv
    hope this helps
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    hiya just remember when you've taken initial outlay say £100k away from cash inflows(money made from the project) lets say 70k which would mean we spent 100k but only made 70k we've lost 30k so its negative.we need to have inflows of cash (money earnt) of a greater value than the cost of the investment to have a positive npv
    hope this helps
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    Hay thanks,I know this sounds mad but i still dont understand do you have another example sorry!!! :roll:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    Think of your initial outlay/investment as negative, subtract the sum of your discounted cash flows, if the sum is still negative then you have a negative NPV, if postive then it's positive.

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    Hi you add up all the present values for all the years the take the expenditure away, example:

    the present value came to 473.40 take the capital expenditure of 500 from that figure (which is a negative figure to start with), the total comes to
    -26.60 because this is a minus figure then it is a negative net present value. If the net present value came to 560, take that away from the capital 500 and it is a positive net present value of 60.

    Hope this makes sense.
    Aly
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR:-How to tell if:- NPV is negative or positive!!! Help!!!

    Thanks :lol:

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