Review article

NET PRESENT VALUE CALCULATION: REAL LIFE APPROACH

Laszlo Karpati orcid.org/0000-0001-8692-0227 ; California Consulting Ltd. & Budapest Business School, Hungary

Abstract

Net Present Value (and IRR) is calculation considered as the most widely accepted measures of investment’s financial evaluation. Both methods apply long-term cashflows for 5 to 15 years ahead. During that period inflation certainly has an effect on both cash inflow and outflow figures. Litereture often does not take into account the inflation or suggest a simplified inflation-corrected calculation method. Author proves that it is not appropriate in case of long-term physical investments. A new method: life-long financial simulation is suggested by the author for financial evaluation of physical investments.

Keywords

NPV; investment; inflation

Hrčak ID:

228709

URI

https://hrcak.srce.hr/228709

Publication date:

28.11.2019.

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