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1.
Money has a time value, net present value is future cashflows brought back to today's value against a discount factor (11% is standard), minus the initial investment. If the net present value of cumulative cashflows is positive, then the project should be accepted, unless a more profitable investment is also availiable.
To calculate the NPV of an investment, one must know the discount factor, cost of investment and expected incomes (based off accurate data)
by Kung-fu Jesus July 06, 2004