Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
What is the NPV of the project?
Expert Solution
Step 1 What is Capital budgeting ?
Capital budgeting is the process of project evaluation a business undertakes in order to evaluate potential high capital outlaying investments. Purchasing machinery for more revenue generation is an example of projects that would need a high level of capital outlay and require capital budgeting.
There are many capital budgeting techniques used to evaluate a project's worth to an investor NPV being one of them, NPV is a capital budgeting technique used to evaluate a investment's acceptability.
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