|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
Same as PV, but usually includes a subtraction for an initial cash outlay.
The present value of the expected future cash flows minus the cost.
A model valuing a firm in which net present value of new
The present value of the total sum of NPVs expected to result from
An investment is worth making if it has a positive NPV. Projects with negative NPVs
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
a process that uses the discounted
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 adjusted present value minus the initial cost of an investment.
The net present value analysis of an asset if financed solely by equity
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.
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)
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.
Present value of growth opportunities (NPV)
net present value of investments the firm is expected to make
Value additivity principal
Prevails when the value of a whole group of assets exactly equals the sum of the
Cash value added (CVA)
A method of investment appraisal that calculates the ratio of the net present value of an
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
Refers generally to analysis procedures for ranking
discounted cash flow (DCF)
Refers to a capital investment analysis technique
See net present value.
present value of growth opportunities (PVGO)
net present value of a firm’s future investments.
Ratio of net present value to initial investment.
PV (present value of cash flows)
the value in today’s dollars of cash flows that occur in different time periods.
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
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
An amount the insurance company will pay if the policyholder ends a whole life
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.
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 weighted average of a probability distribution.
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.
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
International Monetary Fund
An organization founded in 1944 to oversee exchange arrangements of
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
net amount that could be realized by selling the assets of a firm after paying the debt.
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.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Related: par value.
Gold held by governmental authorities as a financial asset.
Actions taken by the Board of Governors of the Federal Reserve System to influence the
Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts
Net advantage to merging
The difference in total post- and pre-merger market value minus the cost of the merger.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
The difference between total assets on the one hand and current liabilities and noncapitalized longterm
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net cash balance
Beginning cash balance plus cash receipts minus cash disbursements.
This is the difference between a day's last trade and the previous day's last trade.
Net errors and omissions
In balance of payments accounting, net errors and omissions record the statistical
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
Sum of disbursement float and collection float.
The company's total earnings, reflecting revenues adjusted for costs of doing business,
Gross, or total, investment minus depreciation.
A lease arrangement under which the lessee is responsible for all property taxes, maintenance
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
Net operating margin
The ratio of net operating income to net sales.
The period of time between the end of the discount period and the date payment is due.
Net profit margin
net income divided by sales; the amount of each sales dollar left over after all expenses
Net salvage value
The after-tax net cash flow for terminating the project.
Net working capital
Current assets minus current liabilities. Often simply referred to as working capital.
Common stockholders' equity which consists of common stock, surplus, and retained earnings.
Reducing transfers of funds between subsidiaries or separate companies to a net amount.
To get or bring in as a net; to clear as profit.
Original face value
The principal amount of the mortgage as of its issue date.
Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.
Reducing fund transfers between affiliates to only a netted amount. netting can be done on
The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in
A person registered with the CFTC who is employed by, and soliciting business
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
Current cost of replacing the firm's assets.
Usually refers to the value of a lessor's property at the time the lease expires.
The minimum available return that will trigger an immunization strategy in a contingent
Scrap value of plant and equipment.
SIMEX (Singapore International Monetary Exchange)
A leading futures and options exchange in Singapore.
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