MGFB10H3 Chapter 13: Chapter 13 Notes
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Chapter 13 capital budgeting, risk considerations, and other special issues. Npv still works the same for both accept/reject and ranking decisions: ranking projects. Higher npv implies greater contribution to firm wealth it is an absolute measure of wealth: reinvestment rate assumed for future assumes all future cash flows are. Multiple irrs may result in this case, the irr cannot be used for either accept/ reject or ranking decisions. The higher irr project may have a lower. Npv, and vice versa, depending on the appropriate discount rate and the size of the project. Assumes cash flows from each project are www. notesolution. com cash flows received reinvested at the discount rate. This is appropriate because it treats reinvestment of all future cash flows consistently, and k is the investor"s opportunity cost. reinvested at that project"s irr. This is inappropriate, particularly when the irr is high. Wacc of firms in an industry associated with the project.
