Utilizing the Time Value of Money

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Issue:

Business

 

Written by:

Melissa G

 

Date added:

January 25, 2016

 

Level:

University

 

Grade:

A

 

No of pages / words:

1 / 277

 

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3721 times

 

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After all, NPV computations are really just a summation of multiple discounted cash flows, both positive and negative, converted into present value terms when the cash flows begin. As such, the discount rate used in the denominators of each present value computation is critical in determining what the final NPV number will turn out to be...
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As such, the discount rate used in the denominators of each present value computation is critical in determining what the final NPV number will turn out to be. A small increase or decrease in the discount rate will have a considerable effect on the final output. Finally, another major disadvantage to using NPV as an investment criterion is that it wholly excludes the value of any real options that may exist within the investment...
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