Net Present Value

While Financial Objective is concluded as Wealth Maximization / Shareholders’ Wealth, Wealth is defined as Net Present Value. NPV of a financial decision is the difference between the Present Value of Cash Inflows and the Present Value of Cash

Outflows:

Image 29

Where C0 is Cash Outflow and r may represent the Opportunity Cost of Capital.

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Multi-period or Semi-annual and other compounding
Internal Rate of Return

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