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#analyst-notes #cfa-level-1 #corporate-finance #reading-35-capital-budgeting #study-session-10
The NPV represents the amount of present-value cash flows that a project can generate after repaying the invested capital (project cost) and the required rate of return on that capital. An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital. If a firm takes on a project with a positive NPV, the position of the stockholders is improved.
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Subject 3. Investment Decision Criteria
3; Cash outflows are treated as negative cash flows since they represent expenditures of the company to fund the project. Cash inflows are treated as positive cash flows since they represent money being brought into the company. <span>The NPV represents the amount of present-value cash flows that a project can generate after repaying the invested capital (project cost) and the required rate of return on that capital. An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital. If a firm takes on a project with a positive NPV, the position of the stockholders is improved. Decision rules: The higher the NPV, the better. Reject if NPV is less than or equal to 0. NPV measures the dollar benefit of the project to shareh


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