in chapter methods of project appraisal we discount the future cash inflows of a project to present value and compare to the present value of cash outflow to check the NPV.
i'm confused about the term here cash inflow of a project.
does this cash inflow mean revenue it generate by that particular project or
it is the net profit after deducting the other expenses.
Plz clarify that
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9y ago#1It means the net cash receipts (i.e. all cash received less all cash paid)
if that is the case then a company holding different projects at the same time, do they recognize revenue of a particular project and reduct expenses related to that particular project to arrive as net cash receipts, am i right?
9y ago#3Yes - it is the net of all the extra cash inflows (receipts) to the company, less all the extra cash outflows (payments) by the company.
another question
while calculating npv we discount the future cash flows yearly, do we consider there that cash flow is happening at the end of the year
cause while calculating the payback period of the same project the answer came out like 3 year 6 months........
9y ago#5For discount, yes - we assume that cash flows are at the ends of years.
For payback period, we assume cash flows arise evenly over the year.
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