Net Present Value Method
Definition of "Net present value method"
A method widely used for evaluating real estate projects. Under the net present value method, the present value (PV) of all cash inflows from the project is compared against the initial investment (I). The net present value (NPV) which is the difference between the present value and the initial investment (i.e., NPV=PV-I), determines whether or not the project is an acceptable investment. To compute the present value of cash inflows, a rate, called the cost of capital is used for discounting. Under the method, if the net present value is positive (NPV>0 or PV.I), the project should be accepted.
Popular Real Estate Terms
Removal of land by the action of water. See also erosion. ...
Lender (such as a bank) that has the property of the borrower as collateral (security, lien). If the mortgage is not paid, the property may be sold to make payment on the outstanding ...
Wedge-shaped step found on a spiral staircase with a wider tread on its outside portion. ...
Regional area from which a particular product or service can expect its greatest demand. For example, a retail department store expects to attract shoppers from a market area having a ...
(1) An arrangement to buy real estate at a specified price and conditions. The failure to honor the commitment may result in damages. (2) Bank commitment to lend money in connection with ...
Contract to act on the behalf of a principal in selling real estate. The principal agrees to pay a commission to the broker when a buyer is produced who is ready, willing, and able to meet ...
Metropolitan locality such as a city. It is heavily populated with many residents and businesses. An example is New York City. ...
The act or process of decreasing in size. The total amount of decrease. ...
Monies set aside in the event unexpected repairs are needed to a building or apartment. It may be in the form of an escrow account in which the seller of the property puts funds away if ...
Have a question or comment?
We're here to help.