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L03 Capital Budgeting - Capital Budgeting The I in Vfirm =...

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1 Copyright ©2003 Stephen G. Buell Capital Budgeting ) , , ( in The D F I f V I firm = Copyright ©2003 Stephen G. Buell Capital Budgeting Process of deciding which long-term investments to make Current outlay followed by cash inflows beyond one year in the future – New equipment, plants, new products Often replacing old equipment with new Expected return = required return? Copyright ©2003 Stephen G. Buell Temporary assumption Required return is given and is the same for all projects • k 0 = required return or the hurdle rate Assumption will be relaxed in the next chapter when we consider risk
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