Explore BrainMass

Explore BrainMass

    Discounted cash flow analysis discounts project investments

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    For a project to create firm value, the project cash flows must exceed the investment in into the project plus a return for the use of capital.

    Discuss how:

    The discounted cash flow analysis then discounts project investments and project cash inflows at the firm's cost of capital. A positive NPV project then adds firm value, whereas a negative NPV project will result in loss of stock value.

    © BrainMass Inc. brainmass.com June 4, 2020, 2:13 am ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/discounted-cash-flow-analysis-discounts-project-investments-447587

    Solution Preview

    The discounted cash flow analysis then discounts project investments and project cash inflows at the firm's cost of capital. A positive NPV project then adds firm value, whereas a negative NPV project will result in loss of stock value.

    Discounted cash flow analysis discounts the cash inflows and cash outflows at the cost of capital of the firm. The difference between the present value of cash inflows and present value of cash outflows is called Net Present Value. If the present value of cash inflows is more ...

    Solution Summary

    The expert examines the discounted cash flow analysis discount project investments.

    $2.19

    ADVERTISEMENT