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Chapter 65. The Investment Problem and C... > INVESTMENT DECISIONS AND OWNERS' WEA...

65.1. INVESTMENT DECISIONS AND OWNERS' WEALTH MAXIMIZATION

Managers must evaluate a number of factors in making investment decisions. Not only does the financial manager need to estimate how much the company's future cash flows will change if it invests in a project, but the manager must also evaluate the uncertainty associated with these future cash flows.

The value of the company today is the present value of all its future cash flows. But we need to understand better where these future cash flows come from. They come from assets that are already in place, which are the assets accumulated as a result of all past investment decisions and future investment opportunities.


  

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