Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 12, Problem 3Q
Summary Introduction

To discuss: The reason for the net present value to be defined as given in the below statement.

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Explain why the NPV of a relatively long-term project, defined as one for whicha high percentage of its cash flows are expected in the distant future, is moresensitive to changes in the cost of capital than is the NPV of a short-term project
We should accept a project if the Net Present Value is positive and the Internal Rate of Return is higher than the cost of capital. What are the reasons for that, what this means?
Why is the NPV of a relatively long-term project (one for which a high percentage of its cash flows occurs in the distant future) more sensitive to changes in the WACC than that of a short-term project?

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Intermediate Financial Management (MindTap Course List)

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