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  • Chapter 6: Analyzing Investment Projects

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    AndresAlbertoSalazar
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    This document discusses capital budgeting techniques for analyzing investment projects. It explains how to use discounted cash flow analysis to evaluate whether to enter new business lines or make equipment investments. Specifically, it shows how to calculate the net present value (NPV) of projects using different discount rates, and how the sign of the NPV indicates whether a project should be accepted or rejected. It also demonstrates how the internal rate of return (IRR) can be used to determine if a project is worth undertaking if the discount rate is equal to the IRR.

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    Chpt6. Flujos Expansion.ges.14ppt.2

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    This document discusses capital budgeting techniques for analyzing investment projects. It explains how to use discounted cash flow analysis to evaluate whether to enter new business lines or make equipment investments. Specifically, it shows how to calculate the net present value (NPV) of projects using different discount rates, and how the sign of the NPV indicates whether a project should be accepted or rejected. It also demonstrates how the internal rate of return (IRR) can be used to determine if a project is worth undertaking if the discount rate is equal to the IRR.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
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    5 views6 pages

    Chapter 6: Analyzing Investment Projects

    Uploaded by

    AndresAlbertoSalazar
    This document discusses capital budgeting techniques for analyzing investment projects. It explains how to use discounted cash flow analysis to evaluate whether to enter new business lines or make equipment investments. Specifically, it shows how to calculate the net present value (NPV) of projects using different discount rates, and how the sign of the NPV indicates whether a project should be accepted or rejected. It also demonstrates how the internal rate of return (IRR) can be used to determine if a project is worth undertaking if the discount rate is equal to the IRR.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 6

    Chapter 6: Analyzing

    Investment Projects

    Objective
    Explain Capital Budgeting
    Develop Criteria
    1

    Objectives
    To show how to use discounted cash
    flow analysis to make decisions such
    as:
    Whether to enter a new line of
    business
    Whether to invest in equipment to
    reduce costs
    2

    NPV of a Project
    Discout

    10%

    Year
    0
    1
    2
    3
    4
    5

    Flow
    PV
    Cum_PV
    -1000
    -1000
    -1000
    450
    409
    -591
    350
    289
    -302
    250
    188
    -114
    150
    102
    -11
    50
    31
    20
    NPV

    DCF Payback

    20
    3

    Do Project

    NPV of a Project
    Discout

    15%

    Year
    0
    1
    2
    3
    4
    5

    Flow
    PV
    Cum_PV
    -1000
    -1000
    -1000
    450
    391
    -609
    350
    265
    -344
    250
    164
    -180
    150
    86
    -94
    50
    25
    -69
    NPV

    -69
    4

    Dont Do Project

    Internal Rate of Return


    NPV of a Project
    Discout

    11.04%

    Year
    0
    1
    2
    3
    4
    5

    Flow
    PV
    Cum_PV
    -1000
    -1000
    -1000
    450
    405
    -595
    350
    284
    -311
    250
    183
    -128
    150
    99
    -30
    50
    30
    0
    NPV

    0
    5

    Indifferent

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