- Trending Categories
Data Structure
Networking
RDBMS
Operating System
Java
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Write the difference between present value and net present value.
The major differences between present value and net present value are as follows −
Present value
Sum of discounted value of cash flow at a particular discounting rate.
Measures future cash flows today.
Does not measures additional wealth.
Does not provide any information about incremental value of a project/investment.
Present value = Future value / (1 + r)^n.
Calculates present value of future cash flow.
Easier to use.
Uses time value of money concept.
Decision making by individuals.
Net present value
Sum of discounted value of future cash flows net of initial investments made by the company.
Measures value of a project.
Calculates additional wealth generated.
Calculates incremental value.
Net present value = present value of future cash flows – initial investment.
Relevant in making investment decisions.
Complex concept.
Derived from present value concept.
Mostly used by companies in making investment decisions.
- Related Questions & Answers
- Write the difference between present value and future value.
- How to calculate net present value using Net present value (NPV)?
- Difference between Net Present Value (NPV) and Profitability Index (PI)
- What is the difference between Market Value and Present Value?
- Differentiate between discounted Net present value and Internal rate of return.
- What does a positive Net Present Value (NPV) imply?
- How to calculate the Net Present Value (NPV) of an investment?
- Difference between Capital Cash Flow (CCF) and Adjusted Present Value (APV) Approaches
- Write the difference between Net operating income and net income.
- Write the difference between EBITDA and net income.
- What is Adjusted Present Value approach?
- Test if the HTML attribute tabindex is present and get the value
- What is Net Present Value (NPV) and what are the pros and cons of using NPV method in Capital Budgeting?
- What is Perpetuity and how to calculate its Present Value?
- Present date as default value in a table