Explain net present value
[DOC File]End of Chapter Exercises: Solutions
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A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4, 281 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years.
[DOC File]Chapter 10
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Calculate net present value (NPV) and internal rate of return (IRR) for a given project and evaluate each method. Define NPV profiles, the crossover rate, and explain the rationale behind the NPV and IRR methods, their reinvestment rate assumptions, and which method is better when evaluating independent versus mutually exclusive projects.
[DOC File]Tutorial exercise 7
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Net Present Value Method: Net Present Value is the sum of the present values of all the cash flows (CF) using the project's cost of capital less the initial investment.
[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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The net present value (NPV) of selling the old machine and purchasing the new machine in five years is -631,636. Since the NPV of Option 2 is higher than the NPV of Option 1, the firm will choose to sell the old equipment and purchase new equipment in five years. 7.29 SAL 5000
[DOC File]Revision 2 – Investment Appraisal
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(a) Calculate the after-tax weighted average cost of capital of Rupab Co. (6 marks) (b) Prepare a forecast of the annual after-tax cash flows of the investment in nominal terms, and calculate and comment on its net present value. (8 marks) (c) Explain how the capital asset pricing model can be used to calculate a project-specific discount rate ...
[DOCX File]Department of the Navy
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Net Present Value (NPV): NPV is the difference between discounted benefits and discounted costs (i.e., discounted savings/cost avoidances less discounted costs). An initiative must have an NPV > 0.0 to be considered financially viable.
[DOC File]Chapter 14
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Explain why net present value is better than internal rate of return for capital investment decisions involving mutually exclusive projects. In evaluating mutually exclusive or competing projects, managers have a choice of using NPV or IRR. When choosing among competing projects, the NPV model correctly identifies the best investment ...
[DOC File]Chapter 13
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b. Net Present Value (Appendix D) $6,160 × 3.696 (PVIFA @ 11%, n = 5) = $22,767 Present Value of inflows. 25,000 Present Value of outflows $(2,233) Net Present Value. c. Debby should not buy this new equipment because the net present value is negative. 20.
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