Making capital investment decisions

1,073 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,073
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
37
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Making capital investment decisions

  1. 1. PAYBACK PERIODDISCOUNTED PAYBACKNET PRESENT VALUEAVERAGE ACCOUNTING RATE OF RETURNINTERNAL RATE OF RETURNMODIFIED INTERNAL RATE OF RETURN
  2. 2. PAYBACK PERIODPapa Ron’s Pizza melakukan investasi dengan membuka gerai pizza baru diMataram. Investasi tersebut membutuhkan biaya Rp 100 juta. Pada tahun ke-berapa Papa Ron’s memperoleh tingkat pengembalian investasi? Berikut iniadalah prediksi aliran kas selama 3 tahun ke depan TAHUN CASH FLOW 1 Rp 30 juta 2 Rp 35 juta 3 Rp 50 juta
  3. 3. PAYBACK PERIODRabat Fertilizer has the following two projects available, should they accepteither of them? YEAR Cash Flow A Cash Flow B 0 -50,000 -70,000 1 30,000 9,000 2 18,000 25,000 3 10,000 35,000 4 5,000 425,000
  4. 4. DISCOUNTED PAYBACK PERIODAn investment project has annual cash inflows of $7,000; $7,500; $8,000 and$8,500 and a discount rate of 14 percent. What is the discounted paybackperiod for these cash flows if the initial cost is $,12000?
  5. 5. AVERAGE ACCOUNTING RATE OF RETURN (ARR)Average annual income = average cash flow – average annual depreciation Average investment = (cost + salvage value)/2 ARR = average annual income/ average investment
  6. 6. AVERAGE ACCOUNTING RATE OF RETURN (ARR)Average annual income = average cash flow – average annual depreciation Average investment = (cost + salvage value)/2 ARR = average annual income/ average investment
  7. 7. NET PRESENT VALUE (NPV)
  8. 8. NET PRESENT VALUE (NPV)Your decision is considering two investment projects, each of whichrequires an up-front expenditure of $15 million. You estimate thatthe investment will produce the following net cash flows: YEAR Project A Project B 1 $ 5,000,000 $ 20,000,000 2 10,000,000 10,000,000 3 20,000,000 6,000,000What are the two projects’ net present value (NPV), assuming thecost of capital is 10 percent? 5 percent?
  9. 9. Internal Rate of Return (IRR)
  10. 10. Internal Rate of Return (IRR)Your decision is considering two investment projects, each of whichrequires an up-front expenditure of $15 million. You estimate thatthe investment will produce the following net cash flows: YEAR Project A Project B 1 $ 5,000,000 $ 20,000,000 2 10,000,000 10,000,000 3 20,000,000 6,000,000What are the two projects’ internal rate of return (IRR)?
  11. 11. Modified InternalRate of Return (MIRR)
  12. 12. Modified Internal Rate of Return (MIRR)Your decision is considering two investment projects, each of whichrequires an up-front expenditure of $15 million. You estimate thatthe investment will produce the following net cash flows: YEAR Project A Project B 1 $ 5,000,000 $ 20,000,000 2 10,000,000 10,000,000 3 20,000,000 6,000,000Calculate the MIRR for each project!

×