Net present value analysis

1. Describe the four steps used in the net present value method.

2. What is the decision rule used to accept or reject a potential investment when using the net present value method? Why does it work?

3. Identify and explain the three key assumptions underlying net present value analysis.

1. How are uneven cash flows treated in net present vlue analysis?

2. How do income taxes impact the cash flows of capital budgeting decisions?

3. How does a noncash expense create a tax shield?

Solution:

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