2.NPV-discount all of the expected cash flows by the correct discount rate (cost of capital adjusted by the risk of the cash flows) and subtract the initial investment from your present value total. Tells how much shareholders wealth will increase by. Most theoretically correct method. EQUATION: NPV = Rule: If NPV is 0 or positive accept project. Do you remember the basic valuation model? V= TO SOLVE FOR THE NPV USING YOUR FINANCIAL CALCULATOR: -80000 CF 25000 CFj 25000 CFI 10000 CFJ 50000 CFJ 70000 CFI 10 I/YR NPV 24.244 If the required return is 10%, should the project be accepted