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Essay / Research Paper Abstract
15 pages. The statement "we should always accept a project if the net present value is positive" will be critically discussed in this paper. Other terms presented herein will include certainty equivalents, adjusting for inflation, uncertain salvage value, and internal rate of return. Bibliography lists 10 sources.
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15 pages (~225 words per page)
File: D0_JAnpvir2.rtf
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Unformatted sample text from the term paper:
for Enterprises Inc. 1/2002 to Use This Paper Properly, INTRODUCTION The statement "we
should always accept a project if the net present value is positive" will be critically discussed in this paper. Other terms presented herein will include certainty equivalents, adjusting for
inflation, uncertain salvage value, and internal rate of return. NET PRESENT VALUE There are three discounted cash-flow methods. The most popular is the net present value method.
The other lesser-used methods are the internal rate of return and the profitability index. All of these are related in one sense, and that is in their recognition that
time is money. In other words, this means the time value of money. The net present value is the amount of monetary change in the shareholders holdings if the
management of a given corporation accepts a project that has been proposed to the company. This amount is measured by the "difference between the net investment cash outflow and
the present value of cash inflows" (Roden & Christy 464). Only if the net present value is positive is the offer accepted; otherwise, if the net present value is
a negative one, the offer would be turned down. Management would look at this in that they would rank the projects according to the net present value of each one.
If capital rationing is absent, then management accepts the project with a positive net present value. Capital budgeting would be that condition in which an organization could not
accept all of the projects it is offered. When this rationing is present, management will choose to select from those appropriate projects the ones that will most likely maximize
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