Why do so many people confuse NPV with PV?
It's incredible how many people confuse these 2 different terms? analysts, associates, uni professors, VPs, MDs. I've seen it and heard it so many times its annoying. When you do a DCF, you find the PV of the company and NOT the NPV. NPV is simply cash outflow+PV which in essence is 0.
I've encountered the same confusion with WC. So many training manuals and instructors state that you have to minus (-) the change in working capital when doing a DCF. But that's bullshit cause the "change" can be either an increase or decrease of WC. You dont use the minus in both situations. You only minus the Change in WC if it's an increase in WC but NOT if it's a decrease-in this case you actually add it.
Cool story bro.
FYI an increase is a positive change and a decrease is a negative change. If you subtract a negative number its the same as adding it... sooo the formula isn't "bullshit". It's correct.
of course but that also depends on how you set-up your model. My point is that it's conceptually confusing, particularly if you've never done a model before. for sake of clarity I always use + decrease in WC/ - Increase in WC
If you can't figure out that subtracting a negative number is the same as adding a positive number, you should not be working in a financial model in the first place.
If you can't figure out that subtracting a negative number is the same as adding a positive number, you should not be working in a financial model in the first place.
Don't you think if this formal was "bullshit" that the thousands of people doing financial models DAILY would have figured that out by now?
Just a thought?
Stupid gripe about PV vs NPV. It's just the lingo, not incorrect math.
About the change, you are incorrect. The change is defined as the current year over the previous year, and if there was an increase then you subtract it. If there was a decrease, then you still subtract it but the number would be negative, thus you're adding it. So the formula is correct, but way to create a post calling other people annoying.
PV and NPV are 2 different concepts which are meant to show different things. Haven't studied finance/accounting at undergrad but at least that I know. Regarding WC - I saw models where the the WC schedule/CF statement shows the change as just a number in which case you manually need to - or + when doing the DCF - just saying...
Dude it's clear there's a lot you don't know. Do yourself a favor and stop responding...
are you a freshman in high school? You haven't studied accounting in school yet....
And what's with people saying "ATM Machine?"
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lol. this one used to annoy me then i figured ah wth who cares. still tickles though
actually I agree with fomc that the NET in npv is there for a reason, however all comes down to a simple question: ¿WHO CARES?
why would anyone be curious about this especially if you know the answer
KRAKEN IS RIGHT
WHO CARES
FARTMAN
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