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A central principal in finance is the Valuation Principle which allows us to use current market prices to determine the value today of the costs

A central principal in finance is the Valuation Principle which allows us to use current market prices to determine the value today of the costs and benefits associated with a decision.

  1. How does this principle underlie the firms investment decision rule to accept all positive NPV investments.
  2. Explain how the separation principle relates to the investment-decision rule?
  3. How does the important property of the Law of One Price and the No-Arbitrage Price underpin the NPV decision rule and firm decision-making?

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