Corporate Finance - The NPV Profile


The NPV profile is a graph that illustrates a project's NPV against various discount rates, with the NPV on the y-axis and the cost of capital on the x-axis. To begin, simply calculate a project's NPV using different cost-of-capital assumptions. Once these are calculated, plot the values on the graph.

Figure 11.5


Look Out!
Since the IRR is the discount rate where the NPV of a project equals zero, the point where the NPV crosses the x-axis is also the project's IRR.
 
Cash Flow and NPV Applications


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  5. Discounted Payback Period

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  6. Adjusted Present Value - APV

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  2. Do you discount working capital in net present value (NPV)?

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  3. How do you use net present value to calculate a capital budget?

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  4. What are the disadvantages of using net present value as an investment criterion?

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  5. What is the formula for calculating net present value (NPV)?

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  6. How much debt is too much when calculating capital budgeting?

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