Healthcare Finance: Basics of Capital Budgeting Name Course Instructor Date  1] What are net present value and internal rate of return? The net present value (NPV) estimates the value of an investment by subtracting the discounted cash outflows including initial outlay from the discounted cash inflows. The cash flows are discounted to take into account the cost of capital of an investment project and calculate the present value. To calculate the NPV, it is necessary to identify the calculated interest rate (cost of capital) and the future cash flows (Juhasz, 2011). A positive NPV indicates that an investment project is worthwhile, and when evaluating different investments the one with the highest NPV is chosen over others (Ehrhardt & Brigham, 2014). The internal rate of return (IRR) is the discount rate where the NPV=0 as cash inflows are equal to the cash outflows. Even though, the IRR al