When should I use NPV in my investment analysis?
An example of an AI chatbot conversation about when to use NPV in investment decisions.
When should I use NPV in my investment analysis?
You should use NPV when you want to evaluate the profitability of an investment by considering the time value of money.
Can you explain how NPV is calculated?
Sure! NPV is calculated by subtracting the initial investment from the present value of future cash flows, discounted at a specific rate.
What discount rate should I use for NPV?
The discount rate should reflect the risk of the investment and the opportunity cost of capital, often the required rate of return.
Are there any limitations to using NPV?
Yes, NPV can be sensitive to the discount rate and may not account for non-financial factors affecting the investment.
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