Net Present Value Analysis (downloadable)

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MBA-TM academic presentation. Trans + references. Overview of Net Present Value analysis at a fictitious company.

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Net Present Value Analysis (downloadable)

  1. 1. MGM626-0801 8.P3P Economics for Decision-Making CTU Online Susan Leslie, Facilitator February 8, 2008
  2. 2. Overview <ul><li>Net present value (NPV) </li></ul><ul><li>Financial appraisal of expansion </li></ul><ul><ul><li>Calculating NPV of net cash flows </li></ul></ul><ul><ul><li>Relevance </li></ul></ul><ul><ul><li>Assumptions </li></ul></ul><ul><ul><li>Risks </li></ul></ul><ul><li>Expansion recommendation </li></ul>
  3. 3. Net Present Value <ul><li>Compare value over time </li></ul><ul><li>Allows risk calculation </li></ul>
  4. 4. NPV Report <ul><li>Net Present Value (U.S.$) </li></ul><ul><ul><li>Risky cash flow = 22.82 mil </li></ul></ul><ul><ul><li>Certainly equivalent cash flow = 21.55 mil </li></ul></ul><ul><li>Contrast </li></ul>
  5. 5. NPV Relevance: Decision-Making Tool <ul><li>Determine future cash flow </li></ul><ul><li>Go/no-go </li></ul><ul><li>Contrast with other projects </li></ul>
  6. 6. Assumptions <ul><li>Certainty Equivalency Factor </li></ul><ul><li>Sales figures </li></ul><ul><li>Discount rate </li></ul>
  7. 7. Risks <ul><li>Trade policy changes </li></ul><ul><li>Weakening U.S. economy </li></ul><ul><li>Political direction </li></ul>
  8. 8. Recommendation <ul><li>Positive NPV looks promising for expansion </li></ul><ul><li>U.S. economic and political risks demand pause and recalculation of risk factors after the election </li></ul>
  9. 9. References <ul><li>RonPaul2008. (2008). On the issues . Retrieved February 8, 2008 from http://www.ronpaul2008.com/issues/ </li></ul><ul><li>World Trade Organization. (2008). The Doha Declaration explained . Retrieved February 8, 2008 from http://www.wto.org/english/tratop_e/dda_e/dohaexplained_e.htm </li></ul>

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