Invantive Estate

Using cash flow projections, the net present value of a project can be calculated by taking a series of expected future payments (negative values) and expected income (positive values) and to calculate the net present value (discounted) of them with a net present value rate. The net present value is also known as the net present worth (NPW). The net present value rate is also known as discount rate, advance interest rate or cost of capital.

The advantage of this method of determining the value of a project is that future developments are taken into account properly in determining the present value of the project.

The disadvantage of this method is the rather subjective nature of estimating future cash flows. It can also be difficult to estimate the net present value rate.