An NPV model is based on variables entered into the model such as

• Cash Flow Year 0 (the estimated cost to build the proposed project)
• Cash Flow Year 1 (a future forecast of Cash Flows one year from now)
• Growth Rate (to forecast future Cash Flows beyond Year 1)
• Terminal Value. (to forecast future Cash Flows into infinity, theoretically)
• Discount Rate

After these variables are entered, the NPV model calculates a net present valuation of a project, business unit, or entire company.

Group of answer choices

If someone presents you with a finished NPV model, backed by research, you can trust that one single valuation number resulting from the model. Always be trusting of the model.

If someone presents you with a finished NPV model, backed by research, you can question all variables that were entered into the model, realizing that different variable values can result in different NPV model results. Always be questioning and skeptical.