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NPV and whole life costing

Paul Naybour Paul Naybour

Published: 15th April 2013

One of the advantages given for the NPV method is that it looks at the whole project life cycle – is this in comparison to the payback method, which only looks at the income for a shorter period of time, and therefore NPV may look at the return up to the project termination?

  1. Student says:

    Yes that is right, the normal practice is to look at the NPV for the whole life of the project. Thia can be quite a long time period for big capital project. In practice because of the compound nature of discounted cash flow then benefits a long time in the future have little present value.

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