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408 Ch 9 NPV - Chapter 9 NPV Capital Budgeting how a firm...

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Chapter 9 NPV Capital Budgeting:   how a firm chooses to finance its operations and how a firm  manage its short-term operating activities and its fixed assets. Determine whether a proposed investment or project will be worth more, once it is in  place, that it costs. 9.1 Net Present Value This is the difference between an investment’s market value and its cost Discounted cash flow valuation:  The process of valuing an investment by discounting  its future cash flows. An investment should be accepted if the net present value is positive and rejected  if it is negative. 9.2 The Payback Rule The  payback  is the length of time it take to recover our initial investment.  The payback period however neglects to involve the concept of the time value of money,  only future cash flows are considered The payback rule also neglects to account of the risk level.  Even though payback periods may be short, the NPV may be negative. 
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