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The role and responsibility of the financial manager

4.2 Financial impact

Focus on the likely Net Present Value (NPV) of investment projects
undertaken (link to shareholder wealth), but also consider:

 Impact on share price

In the real world, unless the details of the project are
communicated effectively to the market, the share price will not be
impacted.

 Impact on financial statements

If the project has low cash flows in the early years, the negative
impact on the financial statements in the short term may give a
negative signal to the market.

 Impact on cost of capital

Raising new finance and undertaking new projects causes the
firm's cost of capital to change.

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