PPT-Net Present Value (NPV) method

WELCOME TO LECTURE 9 SELESTIAN AUGUSTINO 5233 Cash flow What is cash flow A . he year Design Value s based on the average of a 3 year period which includes the selected year plus the two prior years Also displayed is the following informat on for each year the umber of Complete Quarters for that year the 99 th Percentil samp P.V. Viswanath. For a First Course in Finance. 1. Learning Objectives. 2. Decision Criteria. NPV. The Payback Rule. Accounting Rate of Return. IRR. Mutually Exclusive Projects. The case of multiple IRRs. NPV Analysis. The. recommended approach to any significant capital budgeting decision is NPV analysis.. NPV = PV of the incremental benefits – PV of the incremental costs.. When evaluating independent projects, take a project if and only if it has a positive NPV.. CHAPTER 9. The difference between the market value of a project and its cost. Estimating NPV: (DCF). The first step is to estimate the expected future cash flows.. The second step is to estimate the required return for projects of this risk level.. Tirzah DeCaria Jose . Frech. . Sakshi. . Ganesh. . Melissa Lee Bhushan Suryavanshi . Huimin. Tan . Table of Contents. Business Model. Design . Environmental Sustainability. Financial Sustainability. “I don’t believe in . princerple. , But oh I du in interest.”. James Russell Lowell.  . “My interest is in the future because I am going to . spend the rest of my life there.”. Charles F. Kettering. and Other Special Issues . 13. 13. .1. . Describe the capital budgeting process and explain its importance to corporate strategy.. 13. .2. . Identify and apply the main tools used to evaluate investments.. The SPE Foundation through member donations . and a contribution from Offshore Europe. The Society is grateful to those companies that allow their professionals to serve as lecturers. Additional support provided by AIME. 10-. 2. Objectives. Understand . the key elements of the capital budgeting process.. Calculate. , interpret, and evaluate the payback period.. Calculate. , interpret, and evaluate the net present value (NPV) and economic value added (EVA. How do Managers Decide what Projects to Invest in? and Why? Investment Decision Rules outline Decision rules for stand-alone projects NPV, Payback, IRR, EVA Decision rules for mutually exclusive investment opportunities Investment Decision Rules outline Decision rules for stand-alone projects NPV, Payback, IRR, EVA Decision rules for mutually exclusive investment opportunities Project selection with resource constraints After Studying Chapter 13, you should be able to:. Understand the payback period (PBP) method of project evaluation and selection, including its: (a) calculation; (b) acceptance criterion; (c) advantages and disadvantages; and (d) focus on liquidity rather than profitability.. The goal of financial management. is to maximize the value of . stockholders.. Capital Budgeting: has to answer . question: What . long- term investments the firm should take? . Any . firm has a verity of possible investments. Some of them are valuable and some are not. The main job of financial management is identifying which is which. The . Time Value of Money . and Interest . Rates. Time Value of Money. Imagine a simple . real investment . opportunity with the following . cash flows (which are certain to occur).. Cost: $. 1,000 .