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How is present Worth Analysis ined for Projects? Please give an example ether from a real world project youve worked on, or

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Present worth analysis helps managers understand the time value of money and realise the present value of future cash flows in excess of present value investment which has been made today and thus help beat inflation.

Managers thus can forecast costs amd revenues and make strategic plans amd overall helps them in efficient allocation of resources.

For example, Google plans to invest 100,000 USD in next 10 years and believe that investment plans to grow at 20,000 USD for next 10 years at capital cost of 12%.

Then we can calculate net present worth in real terms by discounting 20,000 USD as cashflow at 12% year on year amd arriving at present worth of cash flow.

References :

What are advantages and disadvantages of net present value method, by Motley fool staff, October 23rd 2016.

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