We do these analysis before initiating our project, so just tell me on what basis we do these analysis, we make assumptions or gather information and research ?? We calculate NPV for almost 4 years, so before initiating any project how can we get these yearly values ?? And how to calculate the discount rate(%), so we can use it in a formula to get NPV.
Please guide me and i'm currently preparing for CAPM exam, so I need your help !! Saving Changes...
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Tim PodestaDirector of PM/PMO| Former BP- now IndependentPenn, Bucks, United Kingdom
The discount rate will depend on the cost of capital to the investing organisation. If you are doing a back of the envelope calculation then 10% is a good guide which you can use to compare options. Saving Changes...
Pre-project when the portfolio decision makers are deciding which investments to make, it will be an Order of Magnitude estimate at best for both the costs and benefits.
Mature organizations will provide minimal seed funding to enable a team to generate a higher fidelity estimate on project proposals which "look" good before committing significant resources to deliver them.
Kiron Saving Changes...
Stéphane ParentSelf Employed / Semi-retired| Leader MakerPrince Edward Island, Canada
As you can see from Tim's comment, the interest rate is not calculated but rather assumed. The only time you would calculate the interest rate, is when you want to figure out the internal rate or return (IRR) that will give you a NPV of exactly 0. Saving Changes...
