The firmâ€™s decision to invest its current funds most efficiently in the ling term assets in anticipation of an expected flow of benefits over a series of years.
It is the process of calculating present values of cash inflows using cost of capital as an appropriate rate of discount and subtract present value of cash out flows from the present value of cash inflow and find the NPV which may be positive or negative.
NPV = Present Value of Benefits â€“ Present Value of Costs.
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