Evaluating Npv Estimates

As we discussed in Chapter 9, an investment has a positive net present value if its market value exceeds its cost. Such an investment is desirable because it creates value for its owner. The primary problem in identifying such opportunities is that most of the time

Ross et al.: Fundamentals IV. Capital Budgeting 11. Project Analysis and of Corporate Finance, Sixth Evaluation

Edition, Alternate Edition

350 PART FOUR Capital Budgeting we can't actually observe the relevant market value. Instead, we estimate it. Having done so, it is only natural to wonder whether or not our estimates are at least close to the true values. We consider this question next.

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