By intervening early, SBIRT saves lives and money and is consistent with overall support for patient wellness. Late-stage intervention and substance abuse treatment is expensive, and the patient has often developed comorbid health conditions.
Example 1: Even Cash Inflows: Calculate the net present value of a project which requires an initial investment of $243,000 and it is expected to generate a cash inflow of $50,000 each month for 12 months. Assume that the salvage value of the project is zero. The target rate of return is 12% per annum. Solution.
The net present value (NPV) of an investment project is the present (discounted) value of the project's net cash flows less the project's initial cash outflow. The weighted average cost of capital (WACC) (or just cost of capital) is the rate used by a firm to discount the cash flows in NPV calculations at the firm level. All other things being equal, NPV and WACC are inversely related.