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Essay's paper info
Topic: Business
Number of pages / Number of words: 7 / 1921
Essay's paper body

A more common way of expressing this is to say that the net present value (NPV) is the present value of the benefits (PVB) minus the present value of the costs (PVC)

NPV = PVB - PVC

To calculate the NPV (Net Present Value), I discounted the cash flow at discount rate of 10% for Corporation A and a discount rate of 11% for Corporation B...


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By using the discount rate I conducted a test to see if the project is expected to earn our minimum desired rate of return. Here are my decision rules:

If the NPV is: Benefits vs. Costs Should we expect to earn at least

our minimum rate of return? Accept the

investment?

Positive Benefits > Costs Yes, more than Accept

Zero Benefits = Costs Exactly equal to Indifferent

Negative Benefits < Costs No, less than Reject

In the Capital Budgeting Mini Case, Corporation A's NPV is equal to 20,979 and Corporation B's NPV is equal to 40,252...


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