|Net present value|
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Definition of Net present value
Net present value
A discounted cash flow methodology that uses a required rate of
a process that uses the discounted
The present value of the expected future cash flows minus the cost.
A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment.
Equals the present value (PV) of a capital investment
The present value of all future cash inflows minus the present value
the difference between the present values of all cash inflows and outflows for an investment project
present value of cash flows minus initial investment.
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.
The present value of the total sum of NPVs expected to result from
A model valuing a firm in which net present value of new
An investment is worth making if it has a positive NPV. Projects with negative NPVs
Same as PV, but usually includes a subtraction for an initial cash outlay.
The adjusted present value minus the initial cost of an investment.
The net present value analysis of an asset if financed solely by equity
Refers generally to analysis procedures for ranking
Cash value added (CVA)
A method of investment appraisal that calculates the ratio of the net present value of an
The net present value of an investment divided by the investment's initial cost. Also called
The return at which two alternative projects have the same net present value.
discounted cash flow (DCF)
Refers to a capital investment analysis technique
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)
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
Multiple rates of return
More than one rate of return from the same project that make the net present value
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
See: net present value.
See net present value.
Present value of growth opportunities (NPV)
net present value of investments the firm is expected to make
present value of growth opportunities (PVGO)
net present value of a firm’s future investments.
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
The sum of all the interest options in your policy, including interest.
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
The amount of cash payable on a benefit.
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
An asset’s cost basis minus accumulated depreciation.
The value of an asset as carried on the balance sheet of a
An asset’s original cost, less any depreciation that has been subsequently incurred.
net worth of the firm’s assets or liabilities according
book value and book value per share
Generally speaking, these terms
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:
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
Book Value per Share
The book value of a company divided by the number of shares
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.
An amount the insurance company will pay if the policyholder ends a whole life
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
Also called parity value, the value of a convertible security if it is converted immediately.
the approach to product costing that determines
Economic Value Added (EVA)
Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
economic value added (EVA)
a measure of the extent to which income exceeds the dollar cost of capital; calculated
economic value added (EVA)
Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
The amount of advantage over a current market transaction provided by an in-the-money
The value that an asset is expected to have at the time it is sold at a predetermined
The weighted average of a probability distribution.
The value of the possible outcomes of a variable weighted by the
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Offsetting exposures in one currency with exposures in the same or another currency,
See: Par value.
The nominal value of a security. Also called the par value.
The maturity value of a security. Also known as par value,
Payment at the maturity of the bond. Also called par value or maturity value.
The payoff value of a bond upon maturity. Also called par value. See principal.
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.
The amount at which an asset could be purchased or sold or a liability incurred or
Firm's net value of debt
Total firm value minus total firm debt.
The amount of cash at a specified date in the future that is equivalent in value to a specified
The amount a given payment, or series of payments, will be worth
the amount to which one or more sums of
The value that a sum of money (the present value) earning
Amount to which an investment will grow after earning interest.
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
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
Internet business model
a model that involves
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
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
net amount that could be realized by selling the assets of a firm after paying the debt.
The net proceeds (after taxes and expenses) of selling the assets
net proceeds that would be realized by selling the firm’s assets and paying off its creditors.
The amount a policyholder may borrow against a whole life insurance policy at the interest rate
1) The price at which a security is trading and could presumably be purchased or sold.
The price at which a product or service could be sold on the open market.
A quoted market price per unit times the number of units being valued. Synonymous
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.
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