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Business NPV.
Member rating: No Rating | Words: | Submitted: Mon Mar 22 2004
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Business NPV The NPV is £56700 for the project given the best estimate cash flows. Therefore under the assumption that the firm is operating to maximise the market value of their common stock, and under the assumed conditions of certainty of prices of all assets, the firm should accept the project, as the NPV is positive. This will increase the value of the firm as long as no other groups of projects can be found which will increase the value of the firm. B) The project has 2 internal rates of return (multiple IRR's) that are 4.8% and 13.45%. Affects of multiple IRR's are shown in graph 1. The discount rate exceeds 4.8% the proposal becomes positive and at 13.45% the present value of all the cash flows is 0. Therefore when the cost of capital is between 4.8% and 13.45% the NPV is positive, and following the NPV rule the project should...
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