Lifetime value is the net present value of the profit stream of a customer.
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The net present value of any economic project is the sum of its discounted future cash flows.
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The Net Present Value of the two options considered here are calculated using a 6 percent discount rate.
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Mathematically, the present value of EVA always is exactly the same as the net present value of cash flow.
The value of an operating asset are the net present value of expected free cash flows discounted to infinity.
So pitting intangible value against concrete cost increases is a hard sell, even when the net present value is positive.
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One guide might be the net present value of future tax payments, minus the net costs of public services disbursed there.
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This is, I submit, different in form from investment, which is to look at the net present value of returns to investment.
Government workers make more than twice as much as private sector workers, on average, when you include the net present value of their pensions.
One way to calculate the reduced burden due to delaying payments is to calculate the net present value (NPV) of the stream of payments.
Measuring economic costs weighs the expense of both vaccination and illness against the net present value of the future earnings of someone who would otherwise die from the disease.
That would not sort out Greece's finances it might reduce the net present value of Greek debt by up to 20-25% but it would keep the country away from the markets for a while.
But there would probably be only a limited impact on capital because accounting rules give banks wide latitude in calculating the net present value of the bonds, enabling them to reduce the hit they would take to capital.
Fund managers involved in the talks say that the reduction in the net present value of the bonds may be much higher than that suggested by a 50% reduction in their face value: the true figure could be closer to 70%.
The popular idea that a company is no more than the net present value of its future cash flow depends on guessing first what that cash flow is going to be, and then what future interest rates are going to be.
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If the private sector is accepting a 21% reduction in the net present value of their Greek holdings, in exchange for longer term bonds from a country that is now able to service to its debt, that would be a pretty good deal for the banks.
The results show that the 40-year bond produces a reduction in the Net Present Value of the payments of 43% (an early version of this post had reported this as 37% but commenter Nene pointed out an error in the spreadsheet thanks for the input Nene).
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Although the details vary from country to country, a widely used rule-of-thumb says that a lease does not have to be capitalised so long as the net present value of the lease liabilities (ie, future rents) amounts to less than 90% of the value of the asset.
Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment .
Greece's official lenders, led by the International Monetary Fund, have been pushing for lower coupons and longer maturities on the new bonds to be offered to existing investors, increasing the debt relief in net present value terms to up to 70%.
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Based on the assumption that all future generations will have to pay the bills that today's generation has left behind, Mr Kotlikoff tries to measure the present value of net future taxes (that is, taxes to be paid minus benefits, such as pensions, to be received) for individuals of different ages over their remaining lifetimes and, collectively, for future generations.
Presumably the present value of cost recovery deductions net of future recapture is embedded in the fair market value of buildings.
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Upon restructuring, banks are meant to recognise any fall in net present value in their books, but the losses they admit to are tiny.
In both cases what really makes the entity valuable and successful is the very special way the intangibles and tangible assets come together to generate a present value of future net income.
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