Calculates the current value of a projects future cash flow. Discount tables are used to calculate the net present value. If the NPV is positive, it could be worth investing, if it is negative it is not worth investing.

A new factory costs $1,000,000 to build and the discount factor is 6%.

Questions

1. Fill out the columns labelled discount factor and present value.
2. Comment on your results
3. Explain the advantages of this method
4. Explain any limitations of net present value