To determine: The rue of
Introduction:
Capital budgeting is the procedure of allocating money to projects that are worthy. The main aim is to increase the wealth of the shareholders.
Net Present Value:
Net present value: is the difference between the market value of investment and the cost of the investment.
Answer to Problem 9.1CTF
As per the rule of NPV, a project can be accepted if its NPV is positive.
Explanation of Solution
The rule of net present value is as follows:
- If the computed net present value is positive, then the investment must be accepted.
- If the computed net present value is negative, then the investment must be rejected.
Hence, a project can be accepted if its NPV is positive.
The computation of net present value is used to assess the investment, which, in turn, is utilized to identify the profitability in a proposed investment.
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Chapter 9 Solutions
Fundamentals of Corporate Finance, 11th Edition (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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- 1. Calvulate the internal rate of return(IRR) of each project and based on this criterion. Indicate which project you would recommend or acceptance.arrow_forwardIn calculating the Net Present Value, the project would be acceptable if the outcome was: Group of answer choices Positive Positive or Zero Zero Negativearrow_forward1) What are the factors affecting the discount rate used in project valuation?arrow_forward
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