Discounted Cash Flow Techniques
The calculation of Net Present Value (NPV) requires the discounting of all future income and expenditure in an investment situation at a rate of interest, which may be termed a ‘target rate’. The NPV is the surplus or deficit which accrues when the immediate and discounted future expenditure is set against the discounted future income. The discounting is achieved by the use of the Present Value of £1 table, explained in Chapter 5.
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