Analysis of Net Present Value and Calculation of WACC

Running head: REPORT 0
financial management
APRIL 25, 2019
STUDENT DETAILS:

REPORT 1
Analysis of project-
Net present value refers to the difference between the PV of cash outflow and the PV of cash
inflow, which take place as an outcome of undertaking the project related to investment. The
net present value evaluation is very proper manner to aggregate the cash flow related with
decisions of business, which are spread on various time period, however certain evaluation
can be needed to assemble each applicable and appropriate cash flow (Ondraczek,
Komendantova and Patt, 2015). The net present value may be zero, negative or positive. The
decision related to acceptance of project is based on these three possibilities. Following are
the possibilities of net present value (NPV)-
1. Positive NPV- In a case where the present value of cash inflow is more than the
present value of cash outflow, then NPV is considered as positive NPV. In this
possibility, one can make the decision to accept the proposal of investment.
2. Negative NPV- In a case where the present value of cash inflows is not more than the
present value of cash outflows, then the net present value is considered as negative net
present value. In this way, the project having negative NPV is not acceptable. One
can reject the project with negative net present value.
3. Zero NPV- In a case where the present value of cash inflows is same as the present
value of cash outflows, in that situation the net present value is considered as zero net
present value. In this possibility, one may also make the decision to accept a proposal
of investment (Marchioni and Magni, 2018).
Calculation of WACC-