Difference Between NPV and EPV

NPV vs EPV

NPV is Net Present Value and EPV is Expected Present Value. Though these two terms determine the present value of a company or a firm, one shows the net value and the other indicates the expected value.

One of the main differences that can be seen between NPV and EPV is that the former mainly deals with projects and the latter focuses on the valuation of the business.

NPV is of great use when preparing a capital budgeting project because it shows if the total present value of a project’s expected cash flows in the future is good enough to satisfy initial costs.

EPV is almost the same as that of NPV and the calculations are almost the same. EPV is mainly applied for determining the expected profit or cash flows. EPVs are taken into account for calculating the value of the company when another firm buys it.

The Net Present Value determines the shortfall or excess of cash flows or profit after all the expenses are met. The Net Present value is considered to be the central means in analysing the discounted cash flows. The NPV is also a standard way for using the time value of money for determining long-term projects.

The Net Present Value is used to determine the value of money today to the value of that money in the future. While making such a calculation, all factors like returns and inflation are taken into account. The fact is that if the NPV is positive, then the project can be accepted and if the NPV is negative then the project should be rejected.

Expected Present Value is considered to be a useful tool for project portfolio value and computing project. In EPV, alterative scenarios are defined rather than calculating a single time stream of cash flows. EPV also represents various possibilities wile making the calculations. In EPVs, a project value is worked out for each scenario.

Summary

1. One of the main differences that can be seen between NPV and EPV is that the former mainly deals with projects and the latter focuses on valuation of the business.

2. The Net Present Value determines the shortfall or excess of cash flows or profit after all the expenses are met. The Net Present value is considered to be the central means in analysing the discounted cash flows.

3. Expected Present Value is considered to be a useful tool for project portfolio value and computing project.

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