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Unformatted text preview: can compare them. 6. The Net Present Value rule is simply taking the present value of the benefits of an investment and subtracting the present value of the costs. It is doing the cost-benefit analysis using present values. 7. The financial manager should take all projects with positive NPVs. If there are multiple projects with positive NPVs that are mutually exclusive, then the financial manager should take the single project with the highest NPV. 8. The Law of One Price states that goods trading simultaneously in different competitive markets will trade for the same price in each market. This is basically saying that there are no arbitrage opportunities for the goods in these markets. Alternatively, one could say that arbitrage trading eliminates any mispricing between the markets, thus resulting in the Law of One Price....
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This note was uploaded on 08/26/2010 for the course FINA FINA111 taught by Professor Lynnpi during the Spring '09 term at HKUST.
- Spring '09