
Quantitative Methods  Net Present Value (NPV)
The time value of money calculations can also be used to calculate the net present value of a series of cash flows, or of an investment plus a series of cash flows. Basically, the net present value calculation compares the value of a dollar today with the value of that dollar in the future, after taking rate of return and/or inflation into account. When evaluating an investment, it is desirable for the net present value to be greater than the amount invested; otherwise, there is no incentive to make that investment.
Exam Tips and Tricks A typical time value of money question will look something like this: 
 If $10,000 is invested at 6%, compounded monthly, it would be worth $18,194 in 10 years. $18,194 would be the investment's _____________.
 Internal rate of return
 Present value
 Expected return
 Future value
Rates of ReturnThe correct answer is "d"  the ending value is known as the future value.
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RELATED TERMS

Net Present Value  NPV
Net Present Value (NPV) is the difference between the present ... 
Present Value  PV
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Net Present Value Rule
A rule stating that an investment should be accepted if its net ... 
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Embedded Value
A common valuation measure used outside North America, particularly ... 
Commuted Value
The present value of the future series of cash flows required ...
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