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Informe Ingles - Finanzas

Finanzas (Universidad César Vallejo)

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FACULTY OF BUSINESS
ACCOUNTING SCHOOL

ACADEMIC REPORT ON NET PRESENT VALUE

COURSE:

FINANCE

AUTHOR:
Cosme Pariasca, Helen Yamilet

(https://orcid.org/0000-0002-5420-2770)

TEACHER:

Gordillo Soto, César Fernando

(https://orcid.org/0000-0002-6707-2047)

Ate - Perú

(2023)

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INDICE
I. INTRODUCTION....................................................................................................................3
II. DEVELOPMENT.....................................................................................................................3
What is the VAN?.....................................................................................................................3
How is VAN calculated?...........................................................................................................4
Advantages:.............................................................................................................................5
Disadvantages:.........................................................................................................................5
III. REFERENCIAS BIBLIOGRÁFICAS.........................................................................................6

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I. INTRODUCTION

Currently the implementation of projects worldwide has increased

uncontrollably, which is why better financial decisions can be made through a
prior evaluation using analysis models to evaluate projects, in this case to
select the most appropriate project for the company, the evaluation of projects
implies estimating the profitability and average recovery time of each project.

The ability to evaluate projects using models facilitates decision making by

calculating crucial metrics such as internal rate of return and net present
value.

Estimating the cash flow for each project, including the initial investment,
annual operating cash flows, and cash flows associated with project
completion, is the first step in evaluating a capital project.

The process of identifying, valuing and quantifying the costs and benefits
produced by a project during a specific period of time is called project
evaluation. Being its objective, to determine if the execution of the project is
convenient for whoever carries it out.

That is why in the following report we will present the definition of Net Present
Value, what is it?, how is it calculated? its advantages and disadvantages, this
entire report will be created in order to learn the usage of the VAN.

II. DEVELOPMENT

The net present value is an investment metric in which it is responsible for

updating the receipts and payments of a planning or investment in order to
determine how much the profit or loss will be with said investment.

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What is the VAN?

In this case, when comparing the present value of the projected future cash
flows with the initial investment, the net present value (VAN) is a financial
metric used to evaluate projects. As a result, the present value of the initial
investment is subtracted from the present value of the future cash flow in a
time value of money calculation.

The company must calculate the present value of future cash flows each year
using a discount rate to determine the NPV accurately. To do this, all cash
inflows and outflows up to today are discounted, obtaining a net worth that can
be negative, positive, or zero. It is crucial to emphasize at this point that NPV
does not take into account the risk or uncertainty of cash flows.

This is a metric used in capital budgeting to assess the feasibility of a

proposed investment or project is the net present value. If the result is
positive, the project should be accepted because the project financing is
positive thus increasing the wealth of the shareholders.

How is VAN calculated?

The formula that allows us to calculate the Net Present Value is:

P: It is the initial disbursement to be able to acquire the project asset.

Fx: is the cash flow generated in each period (usually annual).

i: is the discount rate or opportunity cost.

Once the parameters have been defined, what we must do is update them
and take them to the flows, making use of financial mathematics.

After that the compound interest and the result will be a formula.

Formula:

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Example:

A businessman is going to invest in a new product that is going to be launched

on the market, for which he requires an investment of 90,000 soles, and the
following net annual cash flow is reported to him. Where a discount rate of 4%
is considered.

Rpta:
This means that in this production it would be profitable to invest, since it is
greater than 0.

Advantages:

1. It allows to evaluate the profitability of an investment project.

2. Take into account the time value of money.

3. Consider all the cash flows of the project.

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Disadvantages:

One of the main drawbacks of the NPV is that it ignores the time value of
money, or the fact that money today is worth more than the same amount in the
future due to inflation and other factors.

III. REFERENCIAS BIBLIOGRÁFICAS

Top, S.-V. (2023). Técnicas de Evaluación de Proyectos. Wiki NI11. CONTABILIDAD

Y FINANZAS. https://ni11-contabilidad-y-finanzas.fandom.com/es/wiki/T
%C3%A9cnicas_de_Evaluaci%C3%B3n_de_Proyectos

Víctor Velayos Morales. (2023). Valor actual neto (VAN) | Economipedia.

Economipedia. https://economipedia.com/definiciones/valor-actual-
neto.html#:~:text=El%20valor%20actual%20neto%20

Jesús S. (2022, August 16). Valor Actual Neto: ¿Qué es y cómo se calcula de manera
correcta? Economia3. https://economia3.com/valor-actual-neto/

Economía Planificada. (2023, April 6). ¿Qué es el Valor Actual Neto (VAN)?
Características y ventajas. - Economía planificada. Economía Planificada.
https://economiaplanificada.com/valor-actual-neto-van/

Manuel López Millán. (2020, October 29). ¿Qué es el VAN y cómo se calcula? MBA •
IMF Smart Education. https://blogs.imf-formacion.com/blog/mba/que-es-van-
calcula/

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