ABSTRACT
This chapter provides advice on issues that affect the development of Net Present Value (NPV) models. It starts by emphasising the importance of clarifying the purposes of both the project and the models used to support it. It then shows how a model can be built using an iterative top-down process that ensures that all relevant costs and benefits are included and modelled in a coherent manner. After this it turns to more technical matters concerned with modelling practice, before concluding with a worked example. Although this chapter is written about deterministic NPV models, it should be noted that most of its content also applies to NPV risk models.
