What are the factors affecting Net Present Value (NPV)?
The main factors affecting NPV include cash flow projections, discount rate, project duration, and risk.
How do cash flow projections influence NPV?
Cash flow projections are crucial as they estimate the future cash inflows and outflows, directly impacting NPV.
What role does the discount rate play?
The discount rate reflects the opportunity cost of capital; a higher rate decreases NPV, while a lower rate increases it.
Can you explain how project duration affects NPV?
Longer project durations can increase uncertainty in cash flows, potentially lowering NPV due to increased risk.
What risks should I consider when calculating NPV?
Consider market risk, operational risk, financial risk, and regulatory risk, as they can all impact cash flows and discount rates.
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