Project appraisal through discounted and non-discounted cash flow Essay

Project appraisal through discounted and non-discounted change function techniques - Essay ExamplePositive and negative values makes it easy to understand generation of profits and losings as well as assists decision makers to focus only on the highly positive items, the valued time of management can be saved by focusing on the relevant see to it (Fortes, 2010 Horngren, 2005). Calculations are comparatively easy and data of any finite period can be good converted into present value of it. Net present value analysis is derived from some basic pragmatic and practical assumption it is based on a fact that value of 100 today exit be more than the worth of 100 after a year. Keeping this assumption in head teacher a net present value of future cash inflows is calculated using a discounted rate, usually the rate of cost of capital of a company or industry this rate represents the percentage stripped requirement of return by an organization per annum. Annuity factors can also be us ed if cash flows are constant every year. The Net Present Value (NPV) is a useful technique to date profitability of any item being assessed, but has few limitations as well, it only focuses on literal data that can directly hit the profit generation capabilities of an item and financial aspects only period appraising projects and does not account for the non financial aspects, areas and issue associated to that project whereas, there is a high probability of any decision/ project to get affected by numerous external or upcountry non-financial events.