Join Rudolph Rosenberg for an in-depth discussion in this video The NPV, part of Making Investment Decisions.
…In this chapter, we will learn about the…financial methodology called the Net Present Value, or NPV.…Which is widely used by…finance professionals, to asses investment opportunities.…The NPV is actually a mathematical formula which combines the capital invested.…The pace at which the return is generated. The expected return.…And the risk level, to produce a…single number result that determines if an investment…is worthwhile.…That formula computes all of the inflows of…money and outflows of money, of the project.…
Those are called cash flows.…So for example, the capital that you invest…is a negative cash flow since you're spending money.…And any financial return will be a…positive cash flow, since you are receiving money.…If the result of that calculation is equal to 0 or greater, it's a good investment.…If it's negative, then it's not. How great does that sound?…A mathematical formula that tells you how good an investment is?…Well, there's a trick to it, and a big one.…The formula in itself is not the most important aspect of the NPV methodology.…
This course teaches the net present value (NPV) methodology, an investment evaluation formula used by countless publicly traded companies and financial analysts, in a way that makes it accessible and applicable to you—no finance background required. Rudolph Rosenberg explains what investments are, how they are measured, and what makes a good investment. Then he explores the NPV formula in depth, showing you how to evaluate your cash flows, choose a rate of return, and assess the risk of a particular investment. This all culminates in a look at how the principles of investment apply to three real-life scenarios that any individual or company might encounter.
- What is an investment?
- Understanding ROI
- What makes a good investment?
- Using the NPV formula
- Assessing risk
- Applying NPV to real-life situations