DISCOUNTED CASH FLOW II NPy>Represents a good investment at the interest rate i NPy<o does not Let NPm)=∑CF(m)1+r) = if we solve NPv(r)=0 forr, that value ofr is known as the dCF Rater of Return (DCFROR)or Internal rate of return(RR. It represents the interest rate corresponding to the cash flow series such that the pv=o. This dCFror can be compared with external interest rates such as those paid by CD's and Treasury bonds 10/1899 Engineering economics ll10/18/99 Engineering Economics II 11 DISCOUNTED CASH FLOW II NPV > 0 represents a good investment at the interest rate i, NPV < 0 does not. Let N NPV(r) = å CF(n)/(1 + r)n i=n If we solve NPV(r ) = 0 for r, that value of r is known as the DCF Rater of Return (DCFROR) or Internal Rate of Return (IRR). It represents the interest rate corresponding to the cash flow series such that the NPV = 0. This DCFROR can be compared with external interest rates such as those paid by CD’s and Treasury Bonds