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    Capital Budgeting Techniques

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    16. Identify the decision rule for accepting or rejecting investment projects using NPV.
    17. Give an example of mutually exclusive investment projects and explain how they affect the capital budgeting decision.

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    © BrainMass Inc. brainmass.com October 9, 2019, 5:08 pm ad1c9bdddf
    https://brainmass.com/business/return-on-equity/capital-budgeting-techniques-49052

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    A NPV OF INVESTMENT USING FIRM'S COST OF CAPITAL

    YEAR INVESTMENT A INVESTMENT B
    0 -1000 -1000
    1 600 700
    2 600 600
    3 600 500
    4 600 400
    COST OF CAPITAL 12%

    NPV $822.41 $713.41
    PREFERRED INVESTMENT WILL BE THE PROJECT HAVING HIGHER NPV I.e PROJECT A

    A NPV OF INVESTMENT USING CERTAINTY ...

    Solution Summary

    This explains the Net Present Value technique of appraising the projects through a case study. This also explains how to calculate NPV, Interest coverage ratio and Fixed payment coverage ratio.

    $2.19