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Dropdown options: (accept, reject), (accept, reject), (IRR, WACC)An NPV profile plots a projects NPV at various costs of capital. A projects NPV profile is shown in the graph. Identify the

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Answer #1

NPV represents the value that project, if selected, would add or remove from the company. A positive NPV would add to the value of firm, whereas a negative NPV would erode firm's value.

So, in the graph above, Area A represents area of positive NPV and hence ACCEPT the project

Area B represents area of negative NPV and hence REJECT the project

The point at whoch the NPV profile intersects the horizontal axis represents the point of zero NPV, which is IRR.

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