Changing Discount Rates and NPV

In the above analysis, assume that you had been asked to use one discount rate for all of the cash flows. Is there a discount rate that would yield the same NPV as the one above?

If yes, how would you interpret this discount rate?

Biases, Limitations, and Caveats

In spite of its advantages and its linkage to the objective of value maximization, the net present value rule continues to have its detractors, who point out several limitations

• The net present value is stated in absolute rather than relative terms and does not, therefore, factor in the scale of the projects. Thus, project A may have a net present value of $200, while project B has a net present value of $100, but project A may require an initial investment that is ten or 100 times larger than project B. Proponents of the NPV rule argue that it is surplus value, over and above the hurdle rate, no matter what the investment.

• The net present value rule does not control for the life of the project. Consequently, when comparing mutually exclusive projects with different lifetimes, the NPV rule is biased towards accepting longer term projects.

Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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