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Chapter 7: Some Alternative Investment Rules

2. . 1. Why Use Net present value (NPV) NPV = PV (cash inflow) PV (cash outflow)Example: ABC Inc. is considering a riskless project. Initial cash outflow is $100, and ABC Inc. receive $110 one year later. The interest rate is 6% p.a.Solution: NPV = -100 110/1.06 = $3.77.NPV Rule:

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Chapter 7: Some Alternative Investment Rules

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