What is net present value in SAP PPM-PFM - Portfolio Management?

SAP Term: net present value

• Component: PPM-PFM

• Component Name: Portfolio Management

• Description: A metric that defines the value of a project's future cash flow discounted at the weighted average cost of capital WACC.

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• Key Concepts: 
  Net Present Value (NPV) is a financial metric used to evaluate the profitability of a project or investment. It is calculated by subtracting the initial cost of the project from the present value of all future cash flows. NPV is used in SAP Portfolio Management (PPM-PFM) to compare different projects and investments and determine which one will provide the highest return on investment. 
  
  How to use it: 
  In SAP PPM-PFM, NPV can be used to compare different projects and investments. To calculate NPV, you need to know the initial cost of the project, as well as the expected future cash flows. Once you have this information, you can use the NPV formula to calculate the present value of all future cash flows and subtract it from the initial cost. This will give you an indication of how profitable a project or investment is likely to be. 
  
  Tips & Tricks: 
  When calculating NPV, it is important to consider any potential risks associated with a project or investment. This will help you get a more accurate picture of how profitable it is likely to be. Additionally, it is important to remember that NPV is only one metric for evaluating profitability – other metrics such as Internal Rate of Return (IRR) should also be taken into account when making decisions about investments. 
  
  Related Information: 
  For more information about using NPV in SAP PPM-PFM, please refer to the official SAP documentation here: https://help.sap.com/viewer/product/SAP_PORTFOLIO_AND_PROJECT_MANAGEMENT/7.5/en-US