What discount rate to use for npv
[DOC File]CAPITAL BUDGETING
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A PPP discount rate facilitates comparison for evaluation purposes, in net present value terms, of the cash flows in both the traditional (represented by the Public Sector Benchmark (PSB)) and the PPP bidder’s financial model, for the asset/service to be provided under a PPP arrangement. 2.0 Scope. These guidelines apply only . to PPP projects
A Refresher on Net Present Value
Using a 2% real discount rate, the preliminary project NPV is $35,000. In addition to the above cash flows, this project will cause an old machine that the firm owns to wear out two years early. Old machine will last 4 years without the project (low usage), but only 2 years with the project (high usage).
[DOC File]PPP Projects: Discount Rate
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Internal Rate of Return (IRR) The discount rate that equates the present value of the project’s future cash flows with the project’s initial cash outlay. Alternatively, the discount rate that makes NPV=0. Accept the project if IRR > the required rate of return. Reject the project if IRR < the required rate of return.
[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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The net present value of financing side effects equals the after-tax present value of cash flows resulting from the firm’s debt. NPV(Financing Side Effects) = Proceeds – After-Tax PV(Interest Payments) – PV(Principal Payments) ... Since the level of debt is known, the appropriate discount rate to use is Kendrick’s pre-tax cost of debt ...
[DOC File]Chapter 11
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1) try a rate. 2) if NPV = 0, done. 3) if NPV 0, try again. Note: Graph of relationship between NPV and discount rate may be helpful. => IRR is the horizontal intercept for each project => Project A has highest IRR regardless of required return => Projects A and B have same NPV if required return = 17.4% => If required return < 17.4%, project B ...
[DOC File]Ch - University of Kentucky
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Why is the net present value of a capital budgeting project equal to zero when its internal rate of return is used as the discount rate? Calculating an NPV involves obtaining the present values of future cash flows. These future flows are greater than the project's initial outflowthe IRR describes this difference.
[DOC File]Chapter 17: Valuation and Capital Budgeting for the ...
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Internal rate of return: The discount rate that makes the present value of future cash flows equal to the initial cost of the investment. Equivalently, the discount rate that gives a project a zero NPV. IRR Rule: An investment is accepted if its IRR is greater than the required rate of return. An investment should be rejected otherwise.
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