Investment Appraisal
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The document discusses three methods for evaluating investments: 1) Payback period measures the length of time required to recover the cost of an investment, with longer payback periods being less desirable. 2) Accounting rate of return divides average profit by initial investment to determine the ratio of return, allowing easy comparison of different investment opportunities. 3) Net present value calculates the difference between the present value of cash inflows and outflows, used in capital budgeting to analyze investment profitability.
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Investment appraisal techniques
capital budgeting techniques - useful to students of undergraduate. post graduate and profession course students pursuing a course in finance
Capital budgeting
This document discusses capital budgeting, which refers to planning for large expenditures on long-term assets. It involves substantial costs, long-term implications, irreversible decisions, complexity, and risk. Capital budgeting allows for optimal allocation of funds and consideration of different funding sources. Methods for evaluating capital projects include payback period, average rate of return, net present value, internal rate of return, and profitability index. These methods use discounted cash flows to determine which projects will provide the best long-term financial returns.
Capital Budgeting
Capital budgeting is the process of evaluating long-term investment projects. Financial managers use methods like net present value, internal rate of return, and profitability index to analyze projects. These methods examine all cash flows, consider the time value of money, and incorporate the required rate of return. Projects can be independent, like a new phone system, or mutually exclusive, where only one project can be chosen, like purchasing one brand of copier.
Discounted measures
The document discusses several discounted measures used to evaluate project worth: net present value (NPV), net benefit investment ratio (NBIR), benefit-cost ratio (BCR), and internal rate of return (IRR). It provides the formulas and decision rules for each measure. It notes that while NPV, NBIR, BCR, and IRR are commonly used, IRR can be unreliable in situations with non-conventional cash flows or mutually exclusive projects, and that NPV should be used to resolve conflicts between decision rules.
Capital Investment Analysis
This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/capital-investment-analysis-230
Capital Investment Analysis
Also called Capital Budgeting - a complex topic simplified in an easy to understand presentation which is completely self-explanatory. Explains the framework for financial analysis with examples and provides practical insights. Can be used for reference, training & self paced learning. The presentation includes examples worked in an Excel sheet.
Covers:
* The nature & characteristics of long term investments made by corporations
* The problem associated with measuring the rate of return with long term investments
* The approach to solving this problem
* The key methods used in calculating the rate of return and evaluating alternatives
* The practical aspects of the various inputs required to calculate the return on investment
* The basics of the risks associated with long term investments & how to factor ?in such risks
* The strategic considerations involved in long term investment decisions
* The processes involved in long term investment decisions & its implementation
Capital budgeting (project appraisal)
This document discusses capital budgeting, which involves making investment decisions in long-term projects or fixed assets. It explains that capital budgeting involves assigning values to the different components and costs/benefits of a project, assessing the initial investment costs as well as expected revenues and profits over time. The document contrasts traditional capital budgeting methods like payback period and average rate of return with discounted cash flow methods like net present value, internal rate of return, and profitability index, which take into account the time value of money.
Capital Investment And Budgeting
This document provides an overview of capital investment, types of capital investment, and capital budgeting. It defines capital investment as funds invested in a firm for business objectives. The types of capital investment are physical assets, monetary assets, and intangible assets. Capital budgeting is the planning process used to determine if long-term investments are worth pursuing, using methods like payback period, net present value, internal rate of return, and more.
Capital budgeting
The document discusses capital budgeting, which refers to the process of evaluating long-term investment projects. It describes the various techniques used to evaluate capital budgeting proposals, including non-discounting methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The stages of the capital budgeting process and sources of financing for capital budgeting decisions are also outlined.
Recommended
Investment appraisal techniques
capital budgeting techniques - useful to students of undergraduate. post graduate and profession course students pursuing a course in finance
Capital budgeting
This document discusses capital budgeting, which refers to planning for large expenditures on long-term assets. It involves substantial costs, long-term implications, irreversible decisions, complexity, and risk. Capital budgeting allows for optimal allocation of funds and consideration of different funding sources. Methods for evaluating capital projects include payback period, average rate of return, net present value, internal rate of return, and profitability index. These methods use discounted cash flows to determine which projects will provide the best long-term financial returns.
Capital Budgeting
Capital budgeting is the process of evaluating long-term investment projects. Financial managers use methods like net present value, internal rate of return, and profitability index to analyze projects. These methods examine all cash flows, consider the time value of money, and incorporate the required rate of return. Projects can be independent, like a new phone system, or mutually exclusive, where only one project can be chosen, like purchasing one brand of copier.
Discounted measures
The document discusses several discounted measures used to evaluate project worth: net present value (NPV), net benefit investment ratio (NBIR), benefit-cost ratio (BCR), and internal rate of return (IRR). It provides the formulas and decision rules for each measure. It notes that while NPV, NBIR, BCR, and IRR are commonly used, IRR can be unreliable in situations with non-conventional cash flows or mutually exclusive projects, and that NPV should be used to resolve conflicts between decision rules.
Capital Investment Analysis
This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/capital-investment-analysis-230
Capital Investment Analysis
Also called Capital Budgeting - a complex topic simplified in an easy to understand presentation which is completely self-explanatory. Explains the framework for financial analysis with examples and provides practical insights. Can be used for reference, training & self paced learning. The presentation includes examples worked in an Excel sheet.
Covers:
* The nature & characteristics of long term investments made by corporations
* The problem associated with measuring the rate of return with long term investments
* The approach to solving this problem
* The key methods used in calculating the rate of return and evaluating alternatives
* The practical aspects of the various inputs required to calculate the return on investment
* The basics of the risks associated with long term investments & how to factor ?in such risks
* The strategic considerations involved in long term investment decisions
* The processes involved in long term investment decisions & its implementation
Capital budgeting (project appraisal)
This document discusses capital budgeting, which involves making investment decisions in long-term projects or fixed assets. It explains that capital budgeting involves assigning values to the different components and costs/benefits of a project, assessing the initial investment costs as well as expected revenues and profits over time. The document contrasts traditional capital budgeting methods like payback period and average rate of return with discounted cash flow methods like net present value, internal rate of return, and profitability index, which take into account the time value of money.
Capital Investment And Budgeting
This document provides an overview of capital investment, types of capital investment, and capital budgeting. It defines capital investment as funds invested in a firm for business objectives. The types of capital investment are physical assets, monetary assets, and intangible assets. Capital budgeting is the planning process used to determine if long-term investments are worth pursuing, using methods like payback period, net present value, internal rate of return, and more.
Capital budgeting
The document discusses capital budgeting, which refers to the process of evaluating long-term investment projects. It describes the various techniques used to evaluate capital budgeting proposals, including non-discounting methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The stages of the capital budgeting process and sources of financing for capital budgeting decisions are also outlined.
Capital budgeting
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Comparison of npv with irr
The document compares the Net Present Value (NPV) and Internal Rate of Return (IRR) methods of evaluating investment projects. While NPV and IRR usually lead to the same decisions for independent projects, they can provide conflicting rankings for mutually exclusive projects. The key differences are that NPV is expressed in absolute terms and considers variations in cash flow timing, while IRR is a percentage rate and does not follow the value additivity principle. The document recommends using NPV over IRR for mutually exclusive projects due to its more realistic assumptions and ability to directly measure profitability and impact on shareholder wealth.
Capital budgeting ppt
This document discusses capital budgeting and provides examples of how to evaluate capital investment projects. It defines capital budgeting as the process of analyzing projects and deciding which ones to include in the capital budget. It then outlines eight key steps in capital budgeting, including project categorization, evaluation criteria, and financial analysis. Examples are provided to calculate metrics like net present value, internal rate of return, payback period, and profitability index for a sample capital project. The document concludes that while net present value is generally the best method, companies often consider multiple evaluation criteria to make capital budgeting decisions.
Chapter8 investmentcriteria
This document discusses various investment criteria used to evaluate capital budgeting projects. It covers net present value, benefit-cost ratio, internal rate of return, payback period, and accounting rate of return. Formulas are provided for calculating each method along with their pros and cons. The key steps in investment evaluation are estimating costs and benefits, assessing risk, calculating the cost of capital, and using these criteria to determine if a project is worthwhile.
capital investment decision
Financial management involves planning, organizing, directing, and controlling a company's financial resources. Capital investment refers to acquiring long-term assets like plants and machinery. Capital budgeting determines the viability of long-term investments and uses techniques like net present value, internal rate of return, and payback period to evaluate projects. It considers the time value of money, risk, and rates of return to make optimal investment decisions.
Npv Irr
Capital budgeting techniques are used to evaluate long-term investment projects. The ideal evaluation method considers all cash flows over the life of the project, the time value of money, and the required rate of return. Common techniques include payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR). NPV calculates the present value of all cash flows less the initial investment, and a project is accepted if NPV is positive. IRR is the discount rate that makes the net present value equal to zero.
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The document discusses several methods for evaluating capital investment projects, including net present value (NPV), internal rate of return (IRR), payback period, and profitability index. It explains the advantages and disadvantages of each method, and how to properly apply them to determine whether projects should be accepted. The preferred method is NPV, but IRR is also commonly used, though it has some limitations compared to NPV.
Capital budgeting analysis
Ramesh Kumar N presents information on capital budgeting analysis. He has over 32 years of experience in banking and finance. Capital budgeting is the process of analyzing long-term investment projects to determine if they will increase shareholder value. It is a critical decision for companies, as projects involve large investments and risks. Techniques for evaluating projects include payback period, net present value (NPV), internal rate of return (IRR), and profitability index. NPV is the preferred method as it considers all cash flows and time value of money, consistent with maximizing shareholder wealth.
Capital budgeting rules npv, irr, payback, discounted payback, aar « cfa tutor
This document discusses various capital budgeting techniques used to evaluate investment projects, including: net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, and average accounting return (AAR). It provides the calculation method, decision rule, and pros and cons of each technique. NPV is identified as the preferred method since it considers the time value of money and whether a project will increase shareholder wealth. The document also covers concepts like sunk costs, opportunity costs, project categories, and investment assumptions.
Capital Budgeting
Objectives of Capital Budgeting, Importance of Capital Budgeting, Advantages of Capital Budgeting, Disadvantages of Capital Budgeting, Capital Budgeting Process, CAPITAL BUDGETING TECHNIQUES: PAYBACK PERIOD, Advantages Of Pay Back Period (PBP), Disadvantages Of Pay Back Period (PBP), Net present value method, Internal Rate of Return,
Capital budgeting
This document defines and discusses various aspects of capital budgeting. It begins by defining capital budgeting and listing its importance, which includes maximizing shareholder value and minimizing costs. It then discusses different capital structure patterns involving equity, preference shares, and debt. The document concludes by explaining several techniques used for capital budgeting, such as net present value, profitability index, internal rate of return, payback period, and accounting rate of return. Formulas for calculating each technique are provided.
NPV v/s IRR
NPV is superior to IRR for evaluating investment projects. NPV considers the time value of money and all cash flows, providing a direct measure of whether a project increases shareholder wealth. It is more accurate when cash flows fluctuate or the discount rate changes. While IRR indicates return rate, it does not measure wealth effects and can be misleading when cash flows vary or multiple internal rates of return exist. NPV is therefore a better measure for capital budgeting decisions.
Net Present Value and Other Investment Rules
This chapter discusses various capital budgeting techniques for evaluating investment projects, including net present value (NPV), internal rate of return (IRR), payback period, and profitability index. It recommends using NPV as the primary decision rule, as NPV accounts for the time value of money and considers all cash flows. IRR can produce incorrect decisions for projects with multiple IRRs, differing scales of investments, or non-standard cash flow timing. Payback period ignores the time value of money.
Npv and IRR, a link to Project Management
This document discusses two key measures for evaluating projects: net present value (NPV) and internal rate of return (IRR). It defines NPV as the difference between the present value of future cash flows from an investment and the initial investment amount. IRR is defined as the discount rate that results in an NPV of zero. The document provides examples of calculating NPV and IRR for projects and outlines the decision rules for accepting or rejecting projects based on whether their NPV is positive or negative and whether their IRR exceeds the cost of capital. It notes that while NPV and IRR typically provide the same decision, there are some exceptions like projects with non-conventional cash flows or mutually exclusive projects.
Investment criteria modified npv,irr
The document outlines the session plan for evaluating capital projects. It discusses key capital budgeting concepts like net present value (NPV), internal rate of return (IRR), payback period, accounting rate of return. It provides examples and formulas to calculate these metrics and explains the decision rules for project selection using NPV, IRR and other techniques. The document also discusses other topics like discounted cash flow analysis, time value of money, types of projects and risk analysis in capital budgeting.
Capital Budgeting Rules 04
Capital Budgeting Techniques (Investment Decision Rules) (Measuring Return on Investment)
This document discusses various capital budgeting techniques used to evaluate long-term investment projects, including net present value (NPV), internal rate of return (IRR), payback period (PP), discounted payback period (DPP), and profitability index (PI). It provides examples of how to calculate these metrics and compares their strengths and weaknesses in accepting or rejecting investment projects.
Capital budgeting Techniques
This document discusses various capital budgeting techniques, including traditional non-discounting methods like payback period and accounting rate of return, as well as modern discounting techniques like net present value, internal rate of return, and profitability index. It provides formulas and steps for calculating each technique, discusses their advantages and disadvantages, and provides decision criteria for evaluating projects.
2. capital budgeting review
This document discusses various capital budgeting techniques used to evaluate investment projects. It begins by explaining the importance of capital budgeting in long-term investment decisions and financial goals of maximizing firm value. Next, it outlines both non-discounted cash flow methods like average rate of return (ARR) and payback period (PBP), as well as discounted cash flow methods including net present value (NPV), internal rate of return (IRR), modified IRR, and profitability index (PI). For each technique, it provides the calculation method, advantages, and disadvantages. It emphasizes that NPV is the preferred approach as it considers the time value of money and is consistent with wealth maximization.
Capital budjeting & appraisal methods
The document discusses various capital budgeting and investment appraisal methods used to evaluate long-term investment projects. It defines capital budgeting as the formal process of planning and acquiring capital assets and explains why it is important. Several evaluation techniques are covered, including payback period, net present value (NPV), internal rate of return (IRR), and accounting rate of return. The key criteria for accepting or rejecting projects using these methods are also provided.
Net Present Value Vs Profitability Index
This document discusses capital budgeting and methods for evaluating investment projects. It introduces net present value (NPV) and profitability index (PI) as discounted cash flow methods for project evaluation. NPV calculates the present value of future cash flows less the initial investment, while PI is the ratio of present value of cash inflows to initial investment. Both methods accept projects with positive NPV or PI over 1. The document also discusses the advantages and limitations of each method and how NPV is preferred for mutually exclusive projects since it selects the project with the highest positive NPV.
Investment Appraisal: BP
This document provides an investment analysis of BP (British Petroleum). It summarizes BP's history dating back to 1909, highlights its involvement in the 2010 Gulf of Mexico oil spill, and analyzes its financial performance, competitors, and position in the energy industry. The analysis finds that while BP took a financial hit from the spill, its earnings and goodwill have increased in recent years. It recommends BP as a suitable investment for long-term, low-risk investors due to its improving ratios and dividend yield, though it is still recovering from the 2010 spill.
Investment Apprasial
This document discusses investment appraisal techniques used to evaluate business investments. It introduces quantitative methods like payback period, average rate of return, and net present value to calculate the financial feasibility of projects. It also notes qualitative factors considered like risk, market environment, and management experience. The goal is to understand investment and recognize the importance of appraisal in informing capital expenditure decisions.
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Comparison of npv with irr
The document compares the Net Present Value (NPV) and Internal Rate of Return (IRR) methods of evaluating investment projects. While NPV and IRR usually lead to the same decisions for independent projects, they can provide conflicting rankings for mutually exclusive projects. The key differences are that NPV is expressed in absolute terms and considers variations in cash flow timing, while IRR is a percentage rate and does not follow the value additivity principle. The document recommends using NPV over IRR for mutually exclusive projects due to its more realistic assumptions and ability to directly measure profitability and impact on shareholder wealth.
Capital budgeting ppt
This document discusses capital budgeting and provides examples of how to evaluate capital investment projects. It defines capital budgeting as the process of analyzing projects and deciding which ones to include in the capital budget. It then outlines eight key steps in capital budgeting, including project categorization, evaluation criteria, and financial analysis. Examples are provided to calculate metrics like net present value, internal rate of return, payback period, and profitability index for a sample capital project. The document concludes that while net present value is generally the best method, companies often consider multiple evaluation criteria to make capital budgeting decisions.
Chapter8 investmentcriteria
This document discusses various investment criteria used to evaluate capital budgeting projects. It covers net present value, benefit-cost ratio, internal rate of return, payback period, and accounting rate of return. Formulas are provided for calculating each method along with their pros and cons. The key steps in investment evaluation are estimating costs and benefits, assessing risk, calculating the cost of capital, and using these criteria to determine if a project is worthwhile.
capital investment decision
Financial management involves planning, organizing, directing, and controlling a company's financial resources. Capital investment refers to acquiring long-term assets like plants and machinery. Capital budgeting determines the viability of long-term investments and uses techniques like net present value, internal rate of return, and payback period to evaluate projects. It considers the time value of money, risk, and rates of return to make optimal investment decisions.
Npv Irr
Capital budgeting techniques are used to evaluate long-term investment projects. The ideal evaluation method considers all cash flows over the life of the project, the time value of money, and the required rate of return. Common techniques include payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR). NPV calculates the present value of all cash flows less the initial investment, and a project is accepted if NPV is positive. IRR is the discount rate that makes the net present value equal to zero.
Chap006
The document discusses several methods for evaluating capital investment projects, including net present value (NPV), internal rate of return (IRR), payback period, and profitability index. It explains the advantages and disadvantages of each method, and how to properly apply them to determine whether projects should be accepted. The preferred method is NPV, but IRR is also commonly used, though it has some limitations compared to NPV.
Capital budgeting analysis
Ramesh Kumar N presents information on capital budgeting analysis. He has over 32 years of experience in banking and finance. Capital budgeting is the process of analyzing long-term investment projects to determine if they will increase shareholder value. It is a critical decision for companies, as projects involve large investments and risks. Techniques for evaluating projects include payback period, net present value (NPV), internal rate of return (IRR), and profitability index. NPV is the preferred method as it considers all cash flows and time value of money, consistent with maximizing shareholder wealth.
Capital budgeting rules npv, irr, payback, discounted payback, aar « cfa tutor
This document discusses various capital budgeting techniques used to evaluate investment projects, including: net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, and average accounting return (AAR). It provides the calculation method, decision rule, and pros and cons of each technique. NPV is identified as the preferred method since it considers the time value of money and whether a project will increase shareholder wealth. The document also covers concepts like sunk costs, opportunity costs, project categories, and investment assumptions.
Capital Budgeting
Objectives of Capital Budgeting, Importance of Capital Budgeting, Advantages of Capital Budgeting, Disadvantages of Capital Budgeting, Capital Budgeting Process, CAPITAL BUDGETING TECHNIQUES: PAYBACK PERIOD, Advantages Of Pay Back Period (PBP), Disadvantages Of Pay Back Period (PBP), Net present value method, Internal Rate of Return,
Capital budgeting
This document defines and discusses various aspects of capital budgeting. It begins by defining capital budgeting and listing its importance, which includes maximizing shareholder value and minimizing costs. It then discusses different capital structure patterns involving equity, preference shares, and debt. The document concludes by explaining several techniques used for capital budgeting, such as net present value, profitability index, internal rate of return, payback period, and accounting rate of return. Formulas for calculating each technique are provided.
NPV v/s IRR
NPV is superior to IRR for evaluating investment projects. NPV considers the time value of money and all cash flows, providing a direct measure of whether a project increases shareholder wealth. It is more accurate when cash flows fluctuate or the discount rate changes. While IRR indicates return rate, it does not measure wealth effects and can be misleading when cash flows vary or multiple internal rates of return exist. NPV is therefore a better measure for capital budgeting decisions.
Net Present Value and Other Investment Rules
This chapter discusses various capital budgeting techniques for evaluating investment projects, including net present value (NPV), internal rate of return (IRR), payback period, and profitability index. It recommends using NPV as the primary decision rule, as NPV accounts for the time value of money and considers all cash flows. IRR can produce incorrect decisions for projects with multiple IRRs, differing scales of investments, or non-standard cash flow timing. Payback period ignores the time value of money.
Npv and IRR, a link to Project Management
This document discusses two key measures for evaluating projects: net present value (NPV) and internal rate of return (IRR). It defines NPV as the difference between the present value of future cash flows from an investment and the initial investment amount. IRR is defined as the discount rate that results in an NPV of zero. The document provides examples of calculating NPV and IRR for projects and outlines the decision rules for accepting or rejecting projects based on whether their NPV is positive or negative and whether their IRR exceeds the cost of capital. It notes that while NPV and IRR typically provide the same decision, there are some exceptions like projects with non-conventional cash flows or mutually exclusive projects.
Investment criteria modified npv,irr
The document outlines the session plan for evaluating capital projects. It discusses key capital budgeting concepts like net present value (NPV), internal rate of return (IRR), payback period, accounting rate of return. It provides examples and formulas to calculate these metrics and explains the decision rules for project selection using NPV, IRR and other techniques. The document also discusses other topics like discounted cash flow analysis, time value of money, types of projects and risk analysis in capital budgeting.
Capital Budgeting Rules 04
Capital Budgeting Techniques (Investment Decision Rules) (Measuring Return on Investment)
This document discusses various capital budgeting techniques used to evaluate long-term investment projects, including net present value (NPV), internal rate of return (IRR), payback period (PP), discounted payback period (DPP), and profitability index (PI). It provides examples of how to calculate these metrics and compares their strengths and weaknesses in accepting or rejecting investment projects.
Capital budgeting Techniques
This document discusses various capital budgeting techniques, including traditional non-discounting methods like payback period and accounting rate of return, as well as modern discounting techniques like net present value, internal rate of return, and profitability index. It provides formulas and steps for calculating each technique, discusses their advantages and disadvantages, and provides decision criteria for evaluating projects.
2. capital budgeting review
This document discusses various capital budgeting techniques used to evaluate investment projects. It begins by explaining the importance of capital budgeting in long-term investment decisions and financial goals of maximizing firm value. Next, it outlines both non-discounted cash flow methods like average rate of return (ARR) and payback period (PBP), as well as discounted cash flow methods including net present value (NPV), internal rate of return (IRR), modified IRR, and profitability index (PI). For each technique, it provides the calculation method, advantages, and disadvantages. It emphasizes that NPV is the preferred approach as it considers the time value of money and is consistent with wealth maximization.
Capital budjeting & appraisal methods
The document discusses various capital budgeting and investment appraisal methods used to evaluate long-term investment projects. It defines capital budgeting as the formal process of planning and acquiring capital assets and explains why it is important. Several evaluation techniques are covered, including payback period, net present value (NPV), internal rate of return (IRR), and accounting rate of return. The key criteria for accepting or rejecting projects using these methods are also provided.
Net Present Value Vs Profitability Index
This document discusses capital budgeting and methods for evaluating investment projects. It introduces net present value (NPV) and profitability index (PI) as discounted cash flow methods for project evaluation. NPV calculates the present value of future cash flows less the initial investment, while PI is the ratio of present value of cash inflows to initial investment. Both methods accept projects with positive NPV or PI over 1. The document also discusses the advantages and limitations of each method and how NPV is preferred for mutually exclusive projects since it selects the project with the highest positive NPV.
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Capital budgeting rules npv, irr, payback, discounted payback, aar « cfa tutor
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This document provides an investment analysis of BP (British Petroleum). It summarizes BP's history dating back to 1909, highlights its involvement in the 2010 Gulf of Mexico oil spill, and analyzes its financial performance, competitors, and position in the energy industry. The analysis finds that while BP took a financial hit from the spill, its earnings and goodwill have increased in recent years. It recommends BP as a suitable investment for long-term, low-risk investors due to its improving ratios and dividend yield, though it is still recovering from the 2010 spill.
Investment Apprasial
This document discusses investment appraisal techniques used to evaluate business investments. It introduces quantitative methods like payback period, average rate of return, and net present value to calculate the financial feasibility of projects. It also notes qualitative factors considered like risk, market environment, and management experience. The goal is to understand investment and recognize the importance of appraisal in informing capital expenditure decisions.
Investment Appraisal
Investment appraisal is a means of assessing whether an investment project is worthwhile. It involves analyzing factors such as payback period, accounting rate of return, internal rate of return, profitability index, and net present value. Net present value discounts future cash flows to account for the time value of money and allows comparison of investments. Firms use these techniques to evaluate potential investments and determine which projects to pursue.
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The document provides a summary of a presentation on investment appraisal and capital budgeting. It discusses Richard Branson's approach to starting businesses without extensive accounting involvement. It then summarizes the objectives and limitations of management accounting. The presentation evaluates a proposed tea production and export project in Sri Lanka. It provides details of project costs, financing, financial projections including profit and loss statements and cash flows, and evaluates the project using NPV, IRR and payback period analyses. The project is found to have a positive NPV, IRR above the cost of capital, and payback period of under 4 years, indicating it should be accepted.
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This document discusses capital investment decisions and methods for evaluating potential capital projects. It describes how net present value (NPV), internal rate of return (IRR), payback period, accounting rate of return (ARR), and other techniques are used to analyze projects. NPV is preferred over other methods as it considers the time value of money. The document also covers capital rationing, mutually exclusive projects, qualitative factors, and weighted average cost of capital (WACC).
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An article which explains the various capital budgeting techniques and financial & operation leverages. How company uses various techniques to classify and accept various projects.
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The document discusses capital budgeting techniques used to evaluate potential large investments. It describes the payback period method and average rate of return method. The payback period method calculates the number of years for the initial investment to be paid back from cash inflows. The average rate of return method calculates the average annual accounting profit as a percentage of the average investment over the project's lifetime. The document provides examples of calculating payback periods and average rates of return for projects using both straight-line and written down depreciation methods. It outlines the rules for accepting or rejecting projects based on whether the payback period or rate of return meets requirements.
Capital_Budgeting.Chp 4 Unit2.pptx
The document discusses various capital budgeting techniques used to evaluate investment projects. It defines capital budgeting as the process of analyzing projects whose returns extend beyond one year. Some key techniques discussed include net present value (NPV), which takes the time value of money into account and accepts projects with positive NPV. Internal rate of return (IRR) calculates the discount rate that makes the NPV equal to zero. Payback period is the number of years to recover the initial investment without considering time value, while discounted payback period discounts future cash flows. The document provides examples of calculating these techniques.
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The document discusses capital budgeting, which refers to the planning process used to determine whether long-term investments are worth funding with cash. It defines capital budgeting, outlines its key characteristics and process, and describes various techniques used, including payback period, accounting rate of return, net present value, internal rate of return, and profitability index. It also discusses determining relevant cash flows, the cost of capital, and calculating the weighted average cost of capital.
THAI MUSIC-Mariestela e
The document discusses capital budgeting, which is the process of determining whether long-term projects are worth pursuing. It outlines several formal methods used in capital budgeting, including net present value (NPV), internal rate of return (IRR), payback period, profitability index, equivalent annuity, and real options analysis. It then provides an example capital budgeting case study where a corporation must decide whether to introduce a new product line, outlining the projected cash flows and calculating the NPV to determine if the project should be accepted.
capital_budgeting.ppt
Capital budgeting is the process of evaluating long-term investments and projects. It involves analyzing potential additions to fixed assets that require large expenditures and have long-term impacts on the firm's future. Key techniques for evaluating projects include net present value (NPV), internal rate of return (IRR), payback period, and accounting rate of return. These methods discount future cash flows to determine a project's true profitability while accounting for risk and the time value of money. Capital budgeting analysis helps firms select projects that maximize shareholder wealth.
Capital Budgeting- Q.pptx
Capital budgeting is the process of evaluating investments and major expenses to obtain the best returns. It allows organizations to choose between projects when funds are limited. Key techniques include net present value (NPV), profitability index (PI), internal rate of return (IRR), and payback period. NPV discounts future cash flows to determine if a project is profitable. PI calculates the ratio of present value of benefits to initial investment. IRR finds the interest rate that makes NPV equal to zero. Payback period is the time needed to recover the initial costs of a project. Capital budgeting helps organizations select projects that maximize returns and profits over the long run.
Bba 2204 fin mgt week 10 capital budgeting
This document provides an overview of capital budgeting techniques. It begins with learning goals related to calculating and evaluating various capital budgeting methods. It then defines capital budgeting and the capital budgeting process. The document reviews techniques like payback period, net present value (NPV), internal rate of return (IRR), and net present value profiles. It discusses pros and cons of different methods and how NPV and IRR can sometimes provide conflicting rankings. Examples are provided to demonstrate calculating each technique. The summary reviews key capital budgeting concepts and methods covered.
Priyankabba
This document discusses various capital budgeting techniques used to evaluate potential major projects or investments. It describes traditional non-discounted methods like payback period and accounting rate of return. It also explains discounted cash flow methods like net present value (NPV), profitability index, and internal rate of return (IRR). For each method, it provides examples to demonstrate how to calculate them and how they are used to evaluate projects. The key information is that capital budgeting evaluates the potential cash flows of projects to determine if returns meet benchmarks and whether projects should be accepted or rejected.
Finanacial anaylsis
This document discusses financial analysis and its key components. Financial analysis assesses the viability, stability, and profitability of projects through evaluating all costs, revenues, taxes, and more. It aims to determine the minimum viable investment. Major components of financial analysis include accounting statements showing cash flows, income/expenditure, and balance sheets. Key indicators derived from these statements are net present value, internal rate of return, payback period, and break-even point. Projects are typically selected based on having an internal rate of return higher than the discount rate and a payback period that is short.
Unit III.pptx
Capital budgeting involves committing large funds initially for long-term projects with returns expected over many years. It is a continuous process involving multiple departments. Capital budgeting decisions have long-term implications, require substantial funds, are irreversible, and impact future growth. The decision process involves estimating costs/benefits, the required rate of return, and selecting an evaluation method. Common methods are payback period, accounting rate of return, net present value, profitability index, and internal rate of return. Cash flows, risks/uncertainties, and sensitivity must be considered carefully.
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News corp
Slide 2.
Was an American multinational mass media corporation.
Headquarters - NYC
World's second largest media conglomerate in 2011 in terms of revenue.
World's 3rd largest in entertainment in 2009.
Created by Rupert Murdoch in 1979, as a holding company for news Limited.
A media conglomerate describes companies that own a large number of subsidiaries in various mass media such as TV, radio, the internet e.t.c.
Slide 3.
It's headquarters are in NYC.
Slide 4.
Rupert Murdoch's full name is Keith Rupert Murdoch.
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Slide 5.
News corp produced films, TV, magazines, books e.t.c.
Slide 6.
Perhaps the name all of us know & recognize is 21st century fox.
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Slide 7.
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Slide 8.
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Investment Appraisal
- 1. Investment Appraisal Payback Period: The length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions. ( Amount required in the current year Amount earned in the year ) * 12 ( Last -ve value / next +ve value ) * 100 Average / Accounting Rate of Return: The amount of profit, or return, that an individual can expect based on an investment made. Accounting rate of return divides the average profit by the initial investment in order to get the ratio or return that can be expected. This allows an investor or business owner to easily compare the profit potential for projects, products and investments. 1. Add up all the +ve cash flows 2. Subtract investment 3. Divide by no. of years 4. ( Answer / investment ) *100 Net Present Value: The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. 1. Starting from Year 1, * all cash flows with discount factor 2. Add all values obtained 3. Subtract from initial investment