Q: Explain how an increase
in the useful life of the investment will affect the net present value, holding
all other parameters as constants?
A: The present value of the expected future net cash flows is equal
to the sum of all individual cash flows for each period, discounted at the
required rate of return. An increase in the useful life of the investment
keeping the discount rate and initial investments unchanged, will result in an
increase in the net present value of the investment.
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