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Your brilliant finance instructor just made the following comment

Net present value.

Your brilliant finance instructor just made the following comment: “The NPV incorporates everything we have done all semester long.” Is she/he crazy? Why would she/he make such a statement?

Discuss the decision rule of the NPV. Where does the motivation come from? Why is this such a critical element in determining the importance of the model?

Hint
ManagementNPV or the Net present value is the difference between the cash inflows's present value and also the present value of cash outflows over a time period. It is used in the capital budgeting and the investment planning to analyze the profitability of a projected investment or the project.  To calculate the NPV, one needs to estimate the future cash flows for each period and then determ...

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