Capital Sample

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Capital Sample

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Capital Sample

  1. 1. Capital Budgeting Superfactory Excellence Program™ www.superfactory.com
  2. 2. Time Value of Money <ul><li>We could solve the problem like this . . . </li></ul>Look in Appendix C of this Chapter for the Present Value of an Annuity of $1 Table
  3. 3. The Net Present Value Method <ul><li>General decision rule . . . </li></ul>
  4. 4. The Internal Rate of Return Method Find the 10-period row, move across until you find the factor 5.216. Look at the top of the column and you find a rate of 14% . Using the present value of an annuity of $1 table . . .
  5. 5. The Total-Cost Approach If we install the new washer, the investment will yield a positive net present value of $83,202.
  6. 6. Ranking Investment Projects The higher the profitability index, the more desirable the project. Profitability Present value of cash inflows index Investment required =

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