Financial Terms
Net present value

Main Page

Alphabetical
Index

SEARCH


Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.

 


Main Page: finance, accounting, stock trading, tax advisor, inventory, payroll, financial advisor, inventory control,

Definition of Net present value

Net Present Value Image 1

Net present value

A discounted cash flow methodology that uses a required rate of
return (usually a firm’s cost of capital) to determine the present value of a stream of
future cash flows, resulting in a net positive or negative value.



Related Terms:

net present value method

a process that uses the discounted
cash flows of a project to determine whether the
rate of return on that project is equal to, higher than, or
lower than the desired rate of return


Net present value (NPV)

The present value of the expected future cash flows minus the cost.


Net present value (NPV)

A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment.


net present value (NPV)

Equals the present value (PV) of a capital investment
minus the initial amount of capital that is invested, or the entry cost
of the investment. A positive NPV signals an attractive capital investment
opportunity; a negative NPV means that the investment is substandard.


Net Present Value (NPV)

The present value of all future cash inflows minus the present value
of all cash outflows



net present value (NPV)

the difference between the present values of all cash inflows and outflows for an investment project


net present value (NPV)

present value of cash flows minus initial investment.


Net Present Value Image 2

Net Present Value (NPV) Method

A method of ranking investment proposals. NPV is equal to the present value of the future returns, discounted at the marginal cost of capital, minus the present value of the cost of the investment.


Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.


Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.


Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.


NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.


Net adjusted present value

The adjusted present value minus the initial cost of an investment.


Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.


capital budgeting

Refers generally to analysis procedures for ranking
investments, given a limited amount of total capital that has to be allocated
among the various capital investment opportunities of a business.
The term sometimes is used interchangeably with the analysis techniques
themselves, such as calculating present value, net present value,
and the internal rate of return of investments.


Cash value added (CVA)

A method of investment appraisal that calculates the ratio of the net present value of an
investment to the initial capital investment.


Net Present Value Image 3

Cost-benefit ratio

The net present value of an investment divided by the investment's initial cost. Also called
the profitability index.


Crossover rate

The return at which two alternative projects have the same net present value.



discounted cash flow (DCF)

Refers to a capital investment analysis technique
that discounts, or scales down, the future cash returns from an
investment based on the cost-of-capital rate for the business. In essence,
each future return is downsized to take into account the cost of capital
from the start of the investment until the future point in time when the
return is received. present value (PV) is the amount resulting from discounting
the future returns. present value is subtracted from the entry
cost of the investment to determine net present value (NPV). The net
present value is positive if the present value is more than the entry cost,
which signals that the investment would earn more than the cost-ofcapital
rate. If the entry cost is more than the present value, the net
present value is negative, which means that the investment would earn
less than the business’s cost-of-capital rate.


Equivalent annual benefit

The equivalent annual annuity for the net present value of an investment project.


Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.


Extraordinary positive value

A positive net present value.


Internal rate of return

Dollar-weighted rate of return. Discount rate at which net present value (NPV)
investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.


Internal rate of return (IRR)

A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an
initial capital investment.


Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.


Net advantage of refunding

The net present value of the savings from a refunding.


Net advantage to leasing

The net present value of entering into a lease financing arrangement rather than
borrowing the necessary funds and buying the asset.


Net Present Value Image 4

NPV

See: net present value.



NPV

See net present value.


Present value of growth opportunities (NPV)

net present value of investments the firm is expected to make
in the future.


present value of growth opportunities (PVGO)

net present value of a firm’s future investments.


profitability index

Ratio of net present value to initial investment.


Value additivity principal

Prevails when the value of a whole group of assets exactly equals the sum of the
values of the individual assets that make up the group of assets. Stated differently, the principle that the net
present value of a set of independent projects is just the sum of the net present values of the individual projects.


Account Value

The sum of all the interest options in your policy, including interest.


Accumulated Value

An amount of money invested plus the interest earned on that money.


approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs


Benefit Value

The amount of cash payable on a benefit.


Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.


Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.


BOOK VALUE

An asset’s cost basis minus accumulated depreciation.


Book Value

The value of an asset as carried on the balance sheet of a
company. In reference to the value of a company, it is the net worth
(equity) of the company.


Book value

An asset’s original cost, less any depreciation that has been subsequently incurred.


book value

net worth of the firm’s assets or liabilities according
to the balance sheet.


book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.


BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)


Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).


Book Value per Share

The book value of a company divided by the number of shares
outstanding


business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay


CAPITAL IN EXCESS OF PAR VALUE

What a company collected when it sold stock for more than the par value per share.


Carrying value

Book value.


Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.


Cash Surrender Value

This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.


Cash Surrender Value

Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.


Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance presentation Standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR Performance
presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations.


Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.


cost presentation

the approach to product costing that determines
how costs are shown on external financial statements
or internal management reports


Economic Value Added (EVA)

Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
to cover the cost of capital invested in the business.


economic value added (EVA)

a measure of the extent to which income exceeds the dollar cost of capital; calculated
as income minus (invested capital times the cost of capital percentage)


economic value added (EVA)

Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost
of the capital employed.


European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.


Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.


Exit value

The value that an asset is expected to have at the time it is sold at a predetermined
point in the future.


Expected value

The weighted average of a probability distribution.


Expected Value

The value of the possible outcomes of a variable weighted by the
probabilities of each outcome


Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.


Exposure netting

Offsetting exposures in one currency with exposures in the same or another currency,
where exchange rates are expected to move in such a way that losses or gains on the first exposed position
should be offset by gains or losses on the second currency exposure.


Face value

See: Par value.


Face Value

The nominal value of a security. Also called the par value.


Face value

The maturity value of a security. Also known as par value,
principal value, or redemption value.


face value

Payment at the maturity of the bond. Also called par value or maturity value.


Face Value

The payoff value of a bond upon maturity. Also called par value. See principal.


Face Value

The nominal value which appears on the face of a document recording an entitlement, generally an amount of money that has to be repaid on the maturity of a debt instrument.


Fair market value

The price that an asset or service will fetch on the open market.


Fair Market Value

The highest price available, expressed in terms of cash, in an open and unrestricted market between informed, prudent parties acting at arm's length and under no compulsion to transact.


Fair Value

The amount at which an asset could be purchased or sold or a liability incurred or
settled in a current transaction between willing and informed parties. When a quoted market price
is available, fair value is the product of the number of units in question times that market price.
That product also is referred to as the item's market value. For traded securities, the terms fair
value and market value are synonymous. When no quoted market price is available for the item
in question, fair value must be estimated.


Firm's net value of debt

Total firm value minus total firm debt.


Future value

The amount of cash at a specified date in the future that is equivalent in value to a specified
sum today.


Future Value

The amount a given payment, or series of payments, will be worth
at the end of a specified time period, if invested at a given rate


future value

the amount to which one or more sums of
money invested at a specified interest rate will grow over
a specified number of time periods


Future value

The value that a sum of money (the present value) earning
compound interest will have in the future.


future value

Amount to which an investment will grow after earning interest.


Future Value

The amount to which a payment or series of payments will grow by a given future date when compounded by a given interest rate. FVIF future value interest factor.


International Monetary Fund

An organization founded in 1944 to oversee exchange arrangements of
member countries and to lend foreign currency reserves to members with short-term balance of payment
problems.


International Monetary Fund (IMF)

Organization originally established to manage the postwar fixed exchange rate system.


International Monetary Market (IMM)

A division of the CME established in 1972 for trading financial
futures. Related: Chicago Mercantile Exchange (CME).


Internet business model

a model that involves
(1) few physical assets,
(2) little management hierarchy, and
(3) a direct pipeline to customers


intranet

a mechanism for sharing information and delivering data from corporate databases to the local-area network (LAN) desktops


Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.


Intrinsic value of an option

The amount by which an option is in-the-money. An option which is not in-themoney
has no intrinsic value. Related: in-the-money.


Investment value

Related:straight value.


Liquidation value

net amount that could be realized by selling the assets of a firm after paying the debt.


Liquidation Value

The net proceeds (after taxes and expenses) of selling the assets
of a company at fair market prices


liquidation value

net proceeds that would be realized by selling the firm’s assets and paying off its creditors.


Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.


Market value

1) The price at which a security is trading and could presumably be purchased or sold.
2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the
current market price of a firm's shares.


Market value

The price at which a product or service could be sold on the open market.


Market Value

A quoted market price per unit times the number of units being valued. Synonymous
with fair value for financial instruments when a quoted market price is available.


market value added

Market value of equity minus book value.


market-value balance sheet

Financial statement that uses the market value of all assets and liabilities.



 

 

 

 

 

 

Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.


Copyright© 2019 www.finance-lib.com