![]() ![]() Sharon invests in already issued mortgages. If the NPV is positive, the investor can pay that amount more for the investment, and they'll still earn what they want to make. ![]() If the net present value is negative, the initial investment is too high for the investor to meet their goal ROR. The NPV is the calculation investors use to learn if they are paying too much for an investment (or if they could pay more) relative to the rate of return they want to earn. Wouldn't it be handy to have a tool to that tells you by how much you can raise your bid and still meet your investment objective? You can use the result to evaluate a single investment, or you can use it to compare investments.īut what if you are negotiating an investment? All other things being equal, the larger the result, the better the investment. As I've mentioned, you can use the NPV calculation to determine if you should invest.
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