Discounting Flashcards
1
Q
Present Value
A
PV = FV/(1 + r)n
2
Q
Internal Rate of Return
A
The IRR is the interest rate that makes the net present value (NPV) of an investment zero when applying the interest rate over a set period. This rate of return is the break-even point.
3
Q
Net Present Value
A
Where an investment has a positive NPV, it is the point at which an investment becomes positive/favourable and the investment has added value.
4
Q
Finding R
A
nx√ (FV ÷ PV) - 1 = r
