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
The definition of adjoining properties describes two or more real estate properties, lots, or parcels that shared a boundary. A property that shares a common border with another is ...
Same as term resale proceeds: Net amount received when property is sold. It equals the selling price less outstanding mortgage balance less all costs incurred in connection with the sale. ...
Post-like components of wood that comprise a building frame. For example, a building code in a locality might require that studs measuring two-up-six be used for the exterior part of the ...
The prepared form used to specify the terms of the listing contract. Usually a listing form consists of blanks the real estate agent fills in to provide the necessary information needed to ...
Interest computations based only on the original principal. For example, the simple interest on a $100,000, 8% loan is $8,000. It is compared with compound interest which is applied to the ...
The result of an act or a fact. ...
The reason a property appraisal is being made. The purpose of the appraisal is the first step in the appraisal process. The purpose of the appraisal should answer several questions: ...
Method of construction where vertical siding is attached to a horizontal framing structure. Often found in the design of agricultural buildings. ...
Measure of central tendency that is a measure of the center of the data; also called an average. Mean and standard deviation are the two most widely used statistical measures that summarize ...
Have a question or comment?
We're here to help.