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    Capital budgeting

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    Most firms generate cash inflows everyday, not just once at the end of the year. In capital budgeting, should we recognize this fact by estimating daily project cash flows and then using them in the analysis? If we do not, our results are biased, and if so, would the NPV be biased up or down? Please show calculations as necessary.

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    Please find my response below.

    Estimating daily project cash flows would be the theoretically MOST CORRECT way of estimating NPV since cash flows are received every day and not ...

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    The solution answers the question below.