Explain the Net Present Value Formula and Also Explain What

question 116

Essay

Explain the net present value formula and also explain what the net present value represents.
NPV = −Cost + PV

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Definitions:

Common Stock

Equity ownership in a corporation, entitling shareholders to a share of the company’s profits through dividends and voting rights.

Long-term Investment

Investments made to be held for several years or more, typically in bonds, stocks, or real estate.

Financing Activities

Transactions involving the flow of cash between a company and its owners or creditors, typically relating to equity and long-term debt.

Treasury Stock

Shares that were issued and subsequently bought back by the issuing company, reducing the amount of outstanding stock on the open market.