This document discusses techniques for discounted cash flow analysis including net present value (NPV), internal rate of return (IRR), and time value of money. It provides examples of calculating NPV and IRR for projects and investment decisions. It also compares the advantages and disadvantages of NPV and IRR as metrics for investment evaluation.
| Capital Budgeting | CB | Payback Period | PBP | Accounting Rate of Return |...Ahmad Hassan
After studying this, you should be able to:
• Understand the payback period (PBP) method of project evaluation and selection, including its: (a) calculation; (b) acceptance criterion; (c) advantages and disadvantages; and (d) focus on liquidity rather than profitability.
• Understand the three major discounted cash flow (DCF) methods of project evaluation and selection – internal rate of return (IRR), net present value (NPV), and accounting rate of return (ARR).
• Explain the calculation, acceptance criterion, and advantages (over the PBP method) for each of the three major DCF methods. l Define, construct, and interpret a graph called an “NPV profile.”
• Understand why ranking project proposals on the basis of the IRR, NPV, and ARR methods “may” lead to conflicts in rankings.
• Describe the situations where ranking projects may be necessary and justify when to use either IRR, NPV, or ARR rankings.
• Understand how “sensitivity analysis” allows us to challenge the single-point input estimates used in traditional capital budgeting analysis.
• Explain the role and process of project monitoring, including “progress reviews” and “postcompletion audits.”
Capital Budgeting is the formal process of investments or expenditure that is huge in amount. It involves the company's major decision where to invest the current fund in the development of the organization such as for addition, disposition, modification, or replacement of fixed assets.
| Capital Budgeting | CB | Payback Period | PBP | Accounting Rate of Return |...Ahmad Hassan
After studying this, you should be able to:
• Understand the payback period (PBP) method of project evaluation and selection, including its: (a) calculation; (b) acceptance criterion; (c) advantages and disadvantages; and (d) focus on liquidity rather than profitability.
• Understand the three major discounted cash flow (DCF) methods of project evaluation and selection – internal rate of return (IRR), net present value (NPV), and accounting rate of return (ARR).
• Explain the calculation, acceptance criterion, and advantages (over the PBP method) for each of the three major DCF methods. l Define, construct, and interpret a graph called an “NPV profile.”
• Understand why ranking project proposals on the basis of the IRR, NPV, and ARR methods “may” lead to conflicts in rankings.
• Describe the situations where ranking projects may be necessary and justify when to use either IRR, NPV, or ARR rankings.
• Understand how “sensitivity analysis” allows us to challenge the single-point input estimates used in traditional capital budgeting analysis.
• Explain the role and process of project monitoring, including “progress reviews” and “postcompletion audits.”
Capital Budgeting is the formal process of investments or expenditure that is huge in amount. It involves the company's major decision where to invest the current fund in the development of the organization such as for addition, disposition, modification, or replacement of fixed assets.
A Strategic Approach: GenAI in EducationPeter Windle
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This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
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Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
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Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
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Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
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It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
2. Discounted Cash Flow
Topics Covered
Time Value of Money
Net Present Value (NPV)
Discounted Cash Flow (DCF)
Internal Rate of Return (IRR)
DiscountCashFlow | 1
3. Time Value of Money
Cash flows are discounted to take into account the fact that ₹
1 000 to be received some time in the future is worth less today
than ₹ 1 000 received immediately.
Why? Cash-in-hand is certain therefore less risky
Opportunities to invest cash today to earn interest
Let A = sum of money today
r = annual rate of return (as decimal)
B1 = sum of money after one year
B1 = A + A × r
B1 = A ( 1 + r )
DiscountCashFlow | 2
4. Time Value of Money
Let B2 = sum of money after 2 years
B2 = B1 + B1 r = A (1 + r ) + A (1 + r ) r
B2 = A (1 + r ) (1 + r )
In general: Bt = A ( 1 + r )t the compound interest formula
Points to note: “t” can be any positive number and “r” can be
quoted for any period provided “t” is measured in the same units
Example
A credit card charges 2% per month for outstanding balances.
What is the interest rate being charged per annum ?
( 1 + 0.02 )12 = 1.268 or 26.8 %
DiscountCashFlow | 3
5. Time Value of Money
Will “B” always be greater than “A” ?
Switzerland (1970's) and Hong Kong (1990's) imposed negative
interest rates to deter speculators - what would be the problems?
Normally governments increase interest rates to stop speculators
selling currency.
Can calculate the present value (PV) if we know B , r and t .
Can calculate the future value (FV) if we know A , r and t .
Investment appraisal requires the present value so the discounting
formula becomes:
Present value = Future value
( 1 + r )t
DiscountCashFlow | 4
6. Net Present Value (NPV)
You have won ₹ 150 000 on the national lottery.
Option 1: Buy a piece of land which you know you could sell for
₹ 250 000 in a years time.
Option 2: Buy Government gilt-edged securities which offer a 10%
per annum return.
Present Value of Option 2 = ₹ 150 000
Present Value of Option 1 = Future value = ₹ 250 000
( 1 + r ) t ( 1 + 0.1)1
= ₹ 227 237
(the amount you would need to invest today )
DiscountCashFlow | 5
7. Net Present Value
Net Present Value for land purchase
= ₹ 227 237 - ₹ 150 000
= ₹ 77 273
The Investment Decision is:
If NPV is positive - accept the project
If NPV is negative - reject the project
And accept the project with the highest NPV
Therefore choose Option 1: Buy the land.
DiscountCashFlow | 6
8. Discounted Cash Flow (DCF)
A chemical company is considering a project with a lifespan of 5
years which will produce an annual inflow of ₹ 1 000. The
investment outlay is ₹ 3 000 and the discount rate (interest rate)
is 10%. Should the company go ahead ?
Net Present Value = S(present values)= ₹ 790
NPV is positive so go ahead with the project.
Present value = Future value x 1
( 1 + r )t
Discount
factor
Year 0 1 2 3 4 5
Cash Outflow (3 000)
Cash Inflow 1 000 1 000 1 000 1 000 1 000
Net Cash Flow (3 000) 1 000 1 000 1 000 1 000 1 000
Discount factor 1.000 0.909 0.826 0.751 0.683 0.621
Present Value (3 000) 909 826 751 683 621
DiscountCashFlow | 7
Note: brackets denote (a negative value). Cash into project is positive, Cash out of project is negative.
Note: the initial investment is made in period “0” which means that it
is not discounted (t = 0) and only future cashflows (t = >1) are discounted
9. Discounted Cash Flow
EXAMPLE
A company has developed a new product and has to decide
whether to start full production. The marketing department has
estimated that the product could sell at a price of ₹ 25 unit-1
and achieve sales of 5 000 unit a -1. Variable costs are ₹ 14 unit-1
and fixed costs ₹ 20 000 a-1. The initial investment in the
production plant would be ₹ 100 000 with a residual value of ₹ 15
000 after 5 years when the product would probably be replaced.
Should full production be started?
DiscountCashFlow | 8
11. Discounted Cash Flow
Graph of Cumulative Present Value for Project
Net Present Value
-120
-100
-80
-60
-40
-20
0
20
40
60
0 1 2 3 4 5
Cumulative
Present
Value
/
₹
k
Time Period
DiscountCashFlow | 10
12. Net Present Value
Advantages
- Includes the time value of money
- Clear choice criteria
- An absolute measure
Disadvantages
- Complex to calculate
- Difficult to relate to accounts
DiscountCashFlow | 11
13. Internal Rate of Return
The discount rate that makes the NPV of the investment exactly zero.
NPV = Future value
( 1 + discount rate)t
For IRR: 0 = Future value
( 1 + r )t
- calculate r
- but must solve a "t" th order polynomial equation therefore
there will be multiple solutions
- can solve numerically or graphically
S
S
The Investment Decision is to accept the project proposal if
the IRR is higher than the opportunity cost of capital.
DiscountCashFlow | 12
14. Internal Rate of Return Example
Discount rate = 10%
Net Present Value = ₹ 790
Discount rate = 19%
Net Present Value = ₹ 58
Discount rate = 20%
Net Present Value = (₹ 9)
Year 0 1 2 3 4 5
Cash Outflow (3 000)
Cash Inflow 1 000 1 000 1 000 1 000 1 000
Net Cash Flow (3 000) 1 000 1 000 1 000 1 000 1 000
Discount factor 1.000 0.909 0.826 0.751 0.683 0.621
Present Value (3 000) 909 826 751 683 621
Discount factor 1.000 0.833 0.694 0.579 0.482 0.402
Present Value (3 000) 833 694 579 482 402
Discount factor 1.000 0.840 0.706 0.593 0.499 0.419
Present Value (3 000) 840 760 593 498 419
DiscountCashFlow | 13
15. Internal Rate of Return
Graphical Solution of IRR
IRR
-400
-200
0
200
400
600
800
1000
1200
1400
1600
0 5 10 15 20 25 30
Net
Present
Value
/
₹
k
Discount Rate %
DiscountCashFlow | 14
16. Internal Rate of Return
Advantages
- Includes the time value of money
- Easy to understand figure
Disadvantages
- Relative not absolute, must be compared with a
minimum required rate of return
- Multiple solutions
- Ignores risk and will favour higher risk projects
- Assumes all cash generated will be reinvested at
the same rate of return
DiscountCashFlow | 15
