Determining how to calculate NPV when the discount rate is not provided is a common hurdle faced by financial analysts. NPV, or Net Present Value, measures the present value of a series of future cash flows and is a crucial metric in assessing the profitability of investments.
Its importance lies in providing a comprehensive view of an investment’s worth, considering both the time value of money and the risk profile. Historically, methodologies for NPV calculation have evolved to accommodate situations where the discount rate is unknown.