The basic investment rule of NPV. Introduction: The net present value is the difference between the market value of an investment and the cost of the investment.

Question

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Answer 1

Question

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

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Students have asked these similar questions

Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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Answer 2

Question

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

Answer 6

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

Answer 7

Chapter 8, Problem 8.1C

Summary Introduction

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.

Answer 8

Expert Solution & Answer

Explanation of Solution

The basic rules of net present value are as follows:

If the computed net present value is positive, then the investment must be accepted.
If the computed net present value is negative, then the investment must be rejected.

Pictorial representation:

The rule of net present value is shown in the diagram below:

ESSENTIALS CORPORATE FINANCE + CNCT A., Chapter 8, Problem 8.1C

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Conclusion

The computation of net present value is used to assess the investment, which in turn, is utilized to identify the profitability in a proposed investment.

Answer 12

Ch. 8.1 - Prob. 8.1ACQ Ch. 8.1 - Prob. 8.1BCQ Ch. 8.2 - Prob. 8.2ACQ Ch. 8.2 - Prob. 8.2BCQ Ch. 8.3 - Prob. 8.3ACQ Ch. 8.3 - What are the weaknesses of the AAR rule?Ch. 8.4 - Prob. 8.4ACQ Ch. 8.4 - Prob. 8.4BCQ Ch. 8.5 - What does the profitability index measure?Ch. 8.5 - Prob. 8.5BCQ

The basic investment rule of NPV. Introduction: The net present value is the difference between the market value of an investment and the cost of the investment.

To discuss: The basic investment rule of NPV. Introduction: The net present value is the difference between the market value of an investment and the cost of the investment.

Explanation of Solution

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Chapter 8 Solutions

To discuss: The basic investment rule of NPV.

Introduction:

The net present value is the difference between the market value of an investment and the cost of the investment.