Prompt Detail:
To calculate the NPV (Net Present Value) of an all equity financed firm, you need to follow these steps:
Estimate the cash flows: Estimate the expected cash inflows and outflows over the investment period. These cash flows should be after-tax cash flows, which means that you should subtract any taxes that will be paid on the cash flows.
Determine the discount rate: Determine the appropriate discount rate for the investment. This is the rate of return that investors require for the investment. The discount rate should reflect the risk associated with the investment.
Calculate the present value of the cash flows: Using
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