NET PRESENT VALUE (NPV) AS A REINFORCEMENT OF THE DECISION-MAKING PROCESS IN TERMS OF INVESTMENT SELECTION

Abstract

Adequate competition, technical and technological development require enterprises to constantly change and make new investments. Investment is the ongoing expenditure of resources for future benefits. Investments usually involve the commitment of considerable cash resources and manifest themselves in the growth or replacement of tangible fixed assets. Each investment has an individual investment life cycle. The distribution of inflows and outflows associated with the preparation, implementation and operation of an investment. NPV is the net present value, or present value of future cash flows. This indicator predicts what income can be expected from a given investment in terms of the present value of money. Objective decision-making instruments can be constructed using the NPV method. NPV, as the difference between the present values of cash inflows and cash outflows analyzed over a period of time. NPV makes it possible to compare the money that needs to be paid to complete a planned investment with all the cash flows that the company will generate in the future. The NPV method is considered to be the most theoretically correct method for evaluating the profitability of investment projects. There is also a steady increase in interest in it in business practice. The advantages of the NPV method is that it takes into account the entire life cycle of the investment, all cash flows and changes in the value of money over time. A positive NPV value means that the investment contributes to an increase in the value of the company