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Discuss the alternatives to determine the required return to discount investment's cash flows.?


Discuss the alternatives to determine the required return to discount investment's cash flows.?

The main choice is Discounted Cash Flow versus Internal Rate of Return.

Some authors have a preference for one versus the other.

Under normal circumstances they produce the same answer; however, under unusual circumstances they produce different answers. IRR requires that you be able to solve n-th degree polynomials, which can often be approximated with software like EXCEL. IRR also produces multiple solutions, some of which need to be discarded as unrealistic.

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