III.Approach - Discount Cash Flow Model Empirical evidence suggests that a discount cash flow approach is the most common approach used by management to evaluate project feasibility Net present value (NPV) method looks at present value of future net cash flows and any initial capital outflows Basic model Two key components of model: cash flows and discount rate Assumption in the above model that the project has a fixed life Benefit of such a model is tractability D.M.S.
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