Essay specific features
June 3, 2015
No of pages / words:
2 / 309
Rating of current essay:
The formula for NPV can be written as:
How much value is created from undertaking an investment?
The first step is to estimate the expected future cash flows.
The second step is to estimate the required return for projects of this risk level.
The third step is so find the present value of the cash flows and subtract the initial investment...
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Get a price guote
How much and when.
2 estimate discount rate
3 estimate initial costs
If the NPV is positive, accept the project
A positive NPV means that the project is expected to add value to the firm and will therefore increase the wealth of the owners.
Since our goal is to increase owner wealth, NPV is a direct measure of how well this project will meet our goal...
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