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FIN 320F Unit 11, 12 & 13 Working Words and Application Problems Study Questions and Answers | 100% Pass $9.99   Add to cart

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FIN 320F Unit 11, 12 & 13 Working Words and Application Problems Study Questions and Answers | 100% Pass

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  • FIN 320F

FIN 320F Unit 11, 12 & 13 Working Words and Application Problems Study Questions and Answers | 100% Pass Describe how NPV is calculated and describe the information this measure provides about a sequence of cash flows. What is the NPV criterion decision rule? - Answer️️ - PV is the sum of ...

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  • September 15, 2024
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  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • FIN 320F
  • FIN 320F
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FIN 320F Unit 11, 12 & 13 Working
Words and Application Problems Study
Questions and Answers | 100% Pass


Describe how NPV is calculated and describe the information this measure provides

about a sequence of cash flows. What is the NPV criterion decision rule? - Answer✔️✔️-

PV is the sum of the present values of a project's cash flows. It's a way of doing cost-

benefit analysis.For most projects their cash flows occur at different points in time. A

valid comparison is possible only if these cash flows can be restated as of a single point

in time. This involves using the opportunity cost, which reflects the basic time value of

money (risk free interest rate) and an appropriate risk premium. Again drawing on the

concept of cost-benefit analysis, NPV measures whether or not the project increases

wealth. Wealth is command over economic assets. Wealth is increased if cash inflows

stated as of today exceed the cash outflows also stated as of today: the cash

available—wealth—has increased.NPV takes into account all aspects of economic

value: cash flows, the timing of these cash flows, and the risk-adjusted opportunity cost.

The NPV decision rule is to accept projects that have a positive NPV, and reject

projects with a negative NPV.

Why is NPV considered to be a superior method of evaluating the cash flows from a

project? Suppose the NPV for a project's cash flows is computed to be $2,500. What

does this number represent with respect to the firm's shareholders? - Answer✔️✔️-NPV

desirability: NPV is superior to the other methods of analysis presented in our course

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