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What is the intuition behind the NPV capital budgeting framework?
The NPV framework is a discounted cash flow method. The method compares the present value of all cash inflows related with the proposed project vs. the present value of all project outflows. If inflows are adequate to cover all operating costs and financing costs, the project adjoins wealth to shareholders.
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In the NPV analysis, sunk cost is not relevant whereas opportunity cost is for project evaluation. Requirements: Explain and justify the above statement about sunk cost and
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