Corporate Finance - The NPV Profile


The NPV profile is a graph that illustrates a project's NPV against various discount rates, with the NPV on the y-axis and the cost of capital on the x-axis. To begin, simply calculate a project's NPV using different cost-of-capital assumptions. Once these are calculated, plot the values on the graph.

Figure 11.5


Look Out!
Since the IRR is the discount rate where the NPV of a project equals zero, the point where the NPV crosses the x-axis is also the project's IRR.
 
Cash Flow and NPV Applications


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RELATED FAQS
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  2. What is the formula for calculating net present value (NPV) in Excel?

    Understand how net present value is used to estimate the anticipated profitability of projects or investments and how to ... Read Answer >>
  3. What is the formula for calculating net present value (NPV)?

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  4. How much debt is too much when calculating capital budgeting?

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  5. How do you use discounted cash flow to calculate a capital budget?

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  6. Do you include working capital in net present value (NPV)?

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