JJ
This method is widely used by companies to determine the profitability of future projects and acquisitions. For example, they can determine the NPV of a few companies and use this information to decide which is worth targeting in an acquisition. It gives them a target price for an offer to shareholders. Internally, companies also use this method to decide between multiple projects. If the costs is lower than the estimated NPV, then the project is profitable. You can then compare between projects which one is more profitable in today's dollars. There is a formula that makes it fairly easy to calculate the NPV without having to do it manually a hundred times. Of course, it's not that simple in reality. There is alot more to take in consideration than just the NPV and cost of a project or acquisition. It's all explained in Corporate Finance textbooks. Try a used bookstore. They get tons of these from university and college students and they are usually not very expensive. You can learn about the cost of capital, financial ratios, etc. All the formulas are in there and there's exercises.
Have fun.
Pat66
