VAE 511: Livestock Entrepreneurship (1+0)

NET PRESENT WORTH

• The Net Present Worth which is also called as Net Present Value (NPV) is nothing but the present value/worth of the cash flow stream in the project.
• The cash flow in the project is the difference between cash inflow and cash outflow.
• The investments made in the projects are generally called costs or cash outflows.
• The receipts that accrued during different time periods are called as cash inflows or gross returns.
• The cash flows discounted with an appropriate discount rate will give the net present worth of the project.

_­B_t is cash flows in t^th year, C_t is cash outflows in t^th year, t is 1 to 10 years that is life span of the project.

• The choice criterion using NPW is that the project with positive NPW is accepted for implementation and the project with negative NPW is rejected.
• If he is to choose among different projects, the project with highest NPW has to be chosen.