corporate finance

Finance Junkie
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corporate finance

Postby chandniwadhwani92 » Sat Nov 22, 2014 8:54 am

As we know cash flow in NPV are reinvested at market rate. It is assumed that project cash flow could be used to reduce firms requirement this will reduce cost of capital

How cost of capital will reduce by decreasing firms capital requirement????

In IRR firms reinvest at at IRR
In schweser it is given about irr cash flow reinvested that if firm could earn that rate on invested funds the rate should b the one used to discount cash flows
What does this sentence mean???/

Finance Junkie
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corporate finance

Postby edupristine » Wed Nov 26, 2014 8:50 am

Project cash flows can be invested on market rate. IRR is the total return you are getting by investing in project.
For more clarification please provide me an example.

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