Explain why: 1) Distant cash flows are discounted at higher rate as compared to near...
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Accounting
Explain why:
1) Distant cash flows are discounted at higher rate as compared to near cash flows
2) Present value of the project is the maximum (not minimum) one would have to pay for it to be economically acceptable.
3) All the project with positive cash flow should be accepted as per NPV rule.
4) It may be that substantial cash flow occurs in later years making the project worthwhile to pursue, if that project does not recover its initial outlay within 3 years.
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