The net present value of an investment helps us compare the investment and the fi nancial market.

If the NPV is positive, our rule tells us to undertake the investment. This illustrates the second major feature of the fi nancial markets and investment. Not only does the NPV rule tell us which investments to accept and which to reject; the fi nancial markets also provide us with the tools for actually acquiring the funds to make the investments. In short, we use the fi nancial markets to decide both what to do and how to do it. LO.1