NET PRESENT VALUE CALCULATION: REAL LIFE APPROACH

Sa？etak Net Present Value (and IRR) is calculation considered as the most widely accepted measures of investment’s financial evaluation. Both methods apply long-term cashflows for 5 to 15 years ahead. During that period inflation certainly has an effect on both cash inflow and outflow figures. Litereture often does not take into account the inflation or suggest a simplified inflation-corrected calculation method. Author proves that it is not appropriate in case of long-term physical investments. A new method: life-long financial simulation is suggested by the author for financial evaluation of physical investments