Understanding Net Present Value (NPV) Calculations Using Discount Factors
Measuring the profitability and viability of investment projects is crucial for making informed decisions. Net Present Value (NPV) is a widely used financial metric that evaluates the present value of future cash flows generated by an investment, considering the time value of money. Discount factors play a vital role in NPV calculations, allowing investors to account for the changing value of money over time. In this article, we will explore the concept of calculating NPV using discount factors, emphasizing its significance in capital budgeting and project evaluation.