CHAPTER-13

Amount of money today is worth than money in the future

Time Value for Money
Inflation, interest, uncertainty, opportunity to use

Initial investment
Cash Flow
Net Present Value If NPV > 0, the investment project is acceptable
Discount Rate
The Total Cost Approach Period (Year)

Compare Competing Investment Project

The Incremental-Cost Approach Net Present Value = 0

Internal Rate of Return If IRR > Expected Rate of Return,
Expected Rate of Return the investment project is acceptable
Checking whether expected results are realized or not Capital Budgeting
Provide an opportunity to reinforce and Net Present Value
expand successful project Post-Audit of Profitability Index The higher PI, the more desirable the project
Investment Project Investment Required
Using actual observed data to
make side-by-side comparison
Investment Required
Payback Period The shorter PP, the more desirable the project
Annual Net Cash Inflow