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Investment appraisal – Discounted cash flow techniques




                    if the company has two or more mutually exclusive projects under consideration
                     it should choose the one with the highest NPV

                    The NPV gives the impact of the project on shareholder wealth


               3.3  Assumptions used in discounting


               Unless told otherwise:

                    all cash flows occur at the start or end of a year

                    initial investments occur at time period 0 (t0)

                    other cash flows start one year after that (t1) e.g. sales revenue and variable
                     costs earned/spent during the first year would be recorded at t1

                    do not include interest cash flows on funding (already taken into account within
                     the cost of capital used)




















































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