Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 8, Problem 1CC
Summary Introduction
Net present value refers the variance between a present value of cash flows and the present value of
To Explain: The 
decision rule and the relation of this rule with the valuation.
Expert Solution & Answer
Answer to Problem 1CC
NPV decision rule: 
decision rule signifies the decision related to investment in the project.
The value of 
is greater than 0 then the project should be considered for the acceptance, otherwise, the project is rejected.
refers the value of all cash outflows and inflows at present that helps to take the decision to accept or reject a particular project.
The decision rule is related to the valuation principle as 
helps to analyze the value of cash at present and the wealth of the project.- It determines whether the project will increase the wealth or not.
- From the
decision rule, the investor got to know whether the investment should be made or not.
Explanation of Solution
- The
of any project can be positive or negative. - If the
value is positive than the investor should invest in that particular project. - If the
value is negative than the investor should not invest in that particular project. 
decision rule helps to identify the higher 
if the investor needs to choose the better option among the various,
Conclusion
decision rule helps to choose the better options of investments. Hence, the 
decision rule is related to the valuation principle.
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Chapter 8 Solutions
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Ch. 8 - Prob. 1CCCh. 8 - Prob. 2CCCh. 8 - Prob. 3CCCh. 8 - Prob. 4CCCh. 8 - Prob. 5CCCh. 8 - Prob. 6CCCh. 8 - Prob. 7CCCh. 8 - For mutually exclusive projects, explain why...Ch. 8 - Prob. 9CCCh. 8 - Prob. 10CC
Ch. 8 - Prob. 11CCCh. 8 - Prob. 12CCCh. 8 - Prob. 1CTCh. 8 - Prob. 2CTCh. 8 - Prob. 3CTCh. 8 - Prob. 4CTCh. 8 - Prob. 5CTCh. 8 - Prob. 6CTCh. 8 - Prob. 7CTCh. 8 - Prob. 8CTCh. 8 - Prob. 9CTCh. 8 - Prob. 10CTCh. 8 - Prob. 1DCCh. 8 - Prob. 2DCCh. 8 - Prob. 3DCCh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - You are choosing between two projects, but can...Ch. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Orchid Biotech Company is evaluating several...
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