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c.Determine the proposal’s internal rate of return. Note: Round your answer to two decimal places. Enter10.251%as10.25%; enter10.255%as10.26%. Answer % Solution ShareShare Step 1 Calculation of payback period is as follows: ...
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In equation form, the NPV is defined as: CFt is the expected cash flow at Time t, r is the project's risk-adjusted cost of capital, and N is its life, and cash outflows are treated as negative cash flows. The NPV calculation assumes th...
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Ask a question Our experts can answer your tough homework and study questions. Ask a question Search AnswersLearn more about this topic: Break-Even Analysis: Definition & Example from Chapter 4 / Lesson 3 27K A break-even ana...
After all, the NPV calculation already takes into account factors such as the investor’s cost of capital, opportunity cost, and risk tolerance through the discount rate. And the future cash flows of the project, together with the time value of money, are also captured. Therefore, even an...
figures used, what’s hard-coded, and what’s input by users. The NPV calculation is a 'black box' and the underlying math isn't clear unless the user already knows the math.
To account for the time value of money, analysts often apply a discount rate when calculating the value of money in the future. Using NPV to value investments has its advantages, but there are drawbacks as well. NPV calculation relies heavily on assumptions and estimates. Several factors cou...