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    Project/Investment Evaluation

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    If people evaluated the net present value prior to making an investment decision that he or she would be more able to make an educated decision. Explain this statement.

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    Net present value (NPV) is used to estimate how much a potential project will contribute to shareholder wealth. Maximizing shareholder wealth is one of the management's main goals. According to equation (1-11) (Brigham & Houston, 2007, p. 361), NPV is consisted of one cash outflow, which is the cost of the project, and several cash inflows, which are ...

    Solution Summary

    This solution includes an interpretive discussion of the Net Present Value and its effect on decision-making regarding new projects and investments.