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Discussion 1: The net present value of the company can be an estimate or approximation of the assets that the other companies look into in order to understand the depreciating value of the assets like the big machinery or equipment that might be needed for the project. Normally, companies before investing or starting a new project tend to use the net present value in order to get the insight of the capital. This involves crunching some data and tie value pov than that of the return methods or the profitability calculations (Carlson, 2021). The npc or the net present value analysis involves the calculations and comparisons of the data regarding the current value of the money invested into the assets and calculating an estimate what the return on these investments will be and using this cash flow to better understand the future time span of the money. NPC can be considered to b much more precise than the capital budgeting as it takes into consideration various associated risks and the time variable at the same time. The decisions are taken depending upon the results obtained from the net present value calculations. If this number turns out to be a positive value the firms normally decide to proceed with the investment and give the project a go.

The traditional NPV is one of the better options to consider for capital investment as it considers and discounts the flow of cash from the individual financial year as compared to the other options out there. The NPV helps the managers of the organizations to determine if the project will bring return on investment or add value to their company. Thus these also help the shareholders to predict and plan for the company’s future (Galli, 2018). 

Discussion 2: Net present value refers to a discounted cash flow that is used in capital budgeting while determining the viability of an investment or a project. The difference between the present cash inflows and the present outflows indicates the net present value. Cash flows are normally discounted to present value by use of the required rate of return. There are some problems associated with present net values like the accuracy of getting discount rates that show true risk premiums of the investment. Another common challenge is that some organizations will select too low or too high capital costs thus loss of profitable opportunities (Abdelhady, 2021). The result is that an organization can undertake an investment that is not worth it. VPN in this case is referred to as a method of comparing two viable projects of different sizes. The results are always obtained in dollars and so the NPV value will be determined by the size of the input.

Traditional NPV on the contrary does not take into account some considerations. The traditional NPV for example cannot consider that the management of an organization can review its strategies and adapt to new situations while responding to unexpected technological and market developments. These adaptions try to make the original expectations not deviate due to unexpected responses. Investments are to be made when the simple NPV of a given investment is bigger than zero or equals zero. There is an assumption that the kind of investment has to be done now or never (Marchioni & Magni, 2018). For the techniques of traditional NPV to work, one must know the likelihood of things going as expected or as planned. This will help the individual estimate the cash flows expected. Knowing the performance of the overall economy is also an important aspect of traditional NPV. One should know how the economy affects the probabilities to be able to estimate the appropriate discount rates expected in the expansion cash flows

References

Abdelhady, S. (2021). Performance and cost evaluation of solar dish power plant: Sensitivity analysis of Levelized cost of electricity (LCOE) and net present value (NPV). Renewable Energy, 168, 332-342.

Marchioni, A., & Magni, C. A. (2018). Investment decisions and sensitivity analysis: NPV-consistency of rates of return. European Journal of Operational Research, 268(1), 361-372.

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References:

Carlson, R. (2021, February 8). Net present value (NPV) in capital budgeting. The Balance Small Business. Retrieved October 8, 2021, from https://www.thebalancesmb.com/net-present-value-npv-as-a-capital-budgeting-method-392915. 

Galli, B. J. (2018). Effective decision-making in project-based environments: A reflection of best practices. International Journal of Applied Industrial Engineering (IJAIE), 5(1), 50-62.