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Net Present Value (NPV) is a crucial financial tool that helps organizations make informed decisions about investments and projects by comparing the present value of cash inflows with cash outflows. As a critical capital budgeting tool, NPV accounts for the time value of money, making it an essential method for evaluating long-term investments.
NPV serves multiple purposes in decision-making:
Overall, the NPV method is an essential tool for companies looking to allocate capital efficiently, ensuring that investments provide greater returns than the costs incurred.
From Chapter 7:
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