6. 1. Net present value [LO 9.1] Concerning NPV: Describe how NPV is calculated, and describe the...

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6. 1. Net present value [LO 9.1] Concerning NPV:

Describe how NPV is calculated, and describe the information this measure provides about a sequence of cash flows. What is the NPV criterion decision rule?

2. Why is NPV considered a superior method of evaluating the cash flows from a project? Suppose the NPV for a project’s cash flows is computed to be $2 500. What does this number represent with respect to the firm’s shareholders?

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