Rrequired rate of return and cost of capital

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Question 1. Why is NPV considered a superior method of evaluating the cash flows from a project? For a project the net present value is $15. What does this number explain?

Question 2. Differentiate between ‘required rate of return' and ‘cost of capital'?

Question 3. When we say the ‘cost of equity capital' or cost of equity of a firm is 15%, what does it mean? In other words, interpret the meaning of ‘15% cost of equity'.

The rate of return that investors require on their investment in the firm is 15%.

Question 4. What are some of the disadvantages of using the IRR method?

Reference no: EM132516687

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