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The Basics of Capital Budgeting: Evaluating Cash Flows"  Please respond to the following:

Elaborate on why the net present value (NPV) of a relatively long-term project is more sensitive to changes in the cost of capital than is the NPV of a short-term project. Provide exs of NPV that support your position.

From the e-Activity, analyze the reasons why the short-term project that you have chosen might be ranked higher under the NPV criterion if the cost of capital is high, while the long-term project might be deemed better if the cost of capital is low. Determine whether or not changes in the cost of capital could ever cause a change in the internal rate of return (IRR) ranking of such projects. Provide an ex of such a change-or the lack of one-to support your position.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M915364

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