My Doc-The net present value decision rule

May 17th, 2015
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The net present value (NPV) method of capital investment appraisal is based on the view that a project will be regarded as successful if the present value of all expected cash inflows is greater than, or equal to, the capital invested at the outset.

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My DocThe net present value decision ruleThe net present value (NPV) method of capital investment appraisal is based on the view that a project will be regarded as successful if the present value of all expected cash inflows is greater than, or equal to, the capital invested at the outset. It is called net present value because, in calculation, the capital invested is deducted from the present value of the future cash flows. (Use of the word net always means that one item is being deducted from another.) If the present value of the expected cash flows is greater than the capital invested, then the net present value will be positive. If the present value of the expected cash flows is less than the capital invested, then the net present value will be negative. A positive net present value indicates that the project should be accepted, while a negative net present value indicate

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