The document discusses financial evaluation methods for analyzing decision alternatives. It defines key terms like investment costs, cost of capital, discounted cash flow analysis, and presents examples. The objectives of financial evaluation are to array and quantify expected results by comparing investment costs to financial benefits. Common metrics used are net present value, benefit-cost ratio, payback period, and internal rate of return.
This document discusses concepts related to the time value of money including present value, future value, discounting, compounding, and internal rate of return. It provides formulas for calculating future and present values of lump sums, annuities, perpetuities, and growing annuities. The concepts of net present value and internal rate of return are also introduced as methods for evaluating investment projects.
The document discusses concepts related to the time value of money, including:
1) Compounding and discounting cash flows to adjust for differences in timing using interest rates. Compounding calculates future values while discounting calculates present values.
2) Key time value of money calculations like future value, present value, net present value, and internal rate of return which are important financial metrics.
3) Examples are provided to demonstrate calculating future values, present values, and internal rates of return using formulas and Excel functions.
The document discusses bond valuation and the impact of interest rate changes. It defines key bond valuation concepts like face value, yield to maturity, current yield, and pure discount bonds. It explains how to calculate the value of different bond types using present value formulas and discount rates. Finally, it shows that longer-term bonds have higher interest rate risk than shorter-term bonds, as their values fluctuate more with changes in market rates.
This document discusses capital budgeting decisions and methods for evaluating investment projects. It begins by outlining the objectives of understanding investment decisions and various evaluation techniques. It then defines capital budgeting, features of investment decisions, and importance of making sound investment choices. The document explores discounted cash flow methods like net present value (NPV) and internal rate of return (IRR), as well as non-discounted methods including payback period and accounting rate of return. It provides examples of calculating NPV, IRR, and other measures, and acceptance rules for each method. Overall, the document provides an overview of key concepts and steps involved in capital budgeting and investment project evaluation.
This document provides a summary of key concepts in corporate finance, including:
1) Sources of corporate funding and capital structure, capital expenditures, and tools used for allocating funds. Key goals are investing and financing.
2) Investing involves forgoing current consumption for future returns. Financing examines return ratios like ROCE, ROE, and ROIC from different perspectives.
3) Tools used in corporate finance include NPV, IRR, payback period, and leverage. Equity valuation methods include free cash flow, NPV, IRR, relative valuation, and payback period. Modern portfolio theory examines efficient diversification of risk.
This document discusses capital budgeting and methods for evaluating long-term investment projects. It defines capital budgeting as evaluating investments that maximize owner wealth over multiple years. Several evaluation methods are described, including payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI). The document recommends using NPV, as it considers all cash flows and their timing, incorporating the time value of money to determine the true profitability of investments.
Time Preference for Money, Required Rate of Return, Time Value Adjustment, Future Value, Future Value of an Annuity, Sinking Fund, Present Value, Present Value of an Annuity, Capital Recovery and Loan Amortisation, Present Value of Perpetuity, Present Value of Growing Annuities, Value of an Annuity Due, Multi-Period Compounding, Continuous Compounding, Net Present Value, Present Value and Rate of Return , Internal Rate of Return , Internal Rate of Return
The document discusses capital budgeting, which refers to investment decisions organizations make regarding large capital projects or assets. It covers several key aspects of capital budgeting including: the importance of these decisions given factors like large amounts of money involved and long-term impact; various capital budgeting techniques used to evaluate projects like payback period, net present value (NPV), and internal rate of return (IRR); and how to apply these techniques to calculate metrics and determine which projects to accept.
This document discusses concepts related to the time value of money including present value, future value, discounting, compounding, and internal rate of return. It provides formulas for calculating future and present values of lump sums, annuities, perpetuities, and growing annuities. The concepts of net present value and internal rate of return are also introduced as methods for evaluating investment projects.
The document discusses concepts related to the time value of money, including:
1) Compounding and discounting cash flows to adjust for differences in timing using interest rates. Compounding calculates future values while discounting calculates present values.
2) Key time value of money calculations like future value, present value, net present value, and internal rate of return which are important financial metrics.
3) Examples are provided to demonstrate calculating future values, present values, and internal rates of return using formulas and Excel functions.
The document discusses bond valuation and the impact of interest rate changes. It defines key bond valuation concepts like face value, yield to maturity, current yield, and pure discount bonds. It explains how to calculate the value of different bond types using present value formulas and discount rates. Finally, it shows that longer-term bonds have higher interest rate risk than shorter-term bonds, as their values fluctuate more with changes in market rates.
This document discusses capital budgeting decisions and methods for evaluating investment projects. It begins by outlining the objectives of understanding investment decisions and various evaluation techniques. It then defines capital budgeting, features of investment decisions, and importance of making sound investment choices. The document explores discounted cash flow methods like net present value (NPV) and internal rate of return (IRR), as well as non-discounted methods including payback period and accounting rate of return. It provides examples of calculating NPV, IRR, and other measures, and acceptance rules for each method. Overall, the document provides an overview of key concepts and steps involved in capital budgeting and investment project evaluation.
This document provides a summary of key concepts in corporate finance, including:
1) Sources of corporate funding and capital structure, capital expenditures, and tools used for allocating funds. Key goals are investing and financing.
2) Investing involves forgoing current consumption for future returns. Financing examines return ratios like ROCE, ROE, and ROIC from different perspectives.
3) Tools used in corporate finance include NPV, IRR, payback period, and leverage. Equity valuation methods include free cash flow, NPV, IRR, relative valuation, and payback period. Modern portfolio theory examines efficient diversification of risk.
This document discusses capital budgeting and methods for evaluating long-term investment projects. It defines capital budgeting as evaluating investments that maximize owner wealth over multiple years. Several evaluation methods are described, including payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI). The document recommends using NPV, as it considers all cash flows and their timing, incorporating the time value of money to determine the true profitability of investments.
Time Preference for Money, Required Rate of Return, Time Value Adjustment, Future Value, Future Value of an Annuity, Sinking Fund, Present Value, Present Value of an Annuity, Capital Recovery and Loan Amortisation, Present Value of Perpetuity, Present Value of Growing Annuities, Value of an Annuity Due, Multi-Period Compounding, Continuous Compounding, Net Present Value, Present Value and Rate of Return , Internal Rate of Return , Internal Rate of Return
The document discusses capital budgeting, which refers to investment decisions organizations make regarding large capital projects or assets. It covers several key aspects of capital budgeting including: the importance of these decisions given factors like large amounts of money involved and long-term impact; various capital budgeting techniques used to evaluate projects like payback period, net present value (NPV), and internal rate of return (IRR); and how to apply these techniques to calculate metrics and determine which projects to accept.
- Cost of capital is the minimum rate of return expected by investors to compensate for the risk of investing in a company. It includes the cost of different sources of financing like debt, preferred stock, common stock, and retained earnings.
- The weighted average cost of capital (WACC) is calculated by weighting the cost of each individual source of capital according to its proportion of total capital structure. WACC is used to evaluate whether potential projects or investments will increase shareholder value.
- Case studies are provided to demonstrate calculating WACC using different capital structures, costs of individual sources, tax rates, and market values. WACC is recalculated based on changes to financing decisions and market conditions.
This document discusses capital budgeting and cash flow analysis techniques. It defines capital budgeting as the planning and control of capital expenditures, particularly long-term investments in fixed assets. Several evaluation techniques are described, including non-discounting methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. Cash flows are categorized as initial, operating, and terminal cash flows. The steps for estimating cash flows and handling replacement project analysis are also outlined.
The document discusses key concepts related to time value of money including:
1) Individuals generally prefer money now rather than in the future due to opportunities for investment, uncertainty around future cash flows, and preferences for current consumption.
2) An individual's time preference for money can be expressed as an interest rate, which allows comparison of cash flows over different time periods.
3) When evaluating financial decisions, it is important to adjust the timing of cash flows to determine their present value using discounting techniques. This allows comparison of cash flows occurring at different points in time.
Show the application of the NPV rule in the choice between mutually exclusive projects, replacement decisions, projects with different lives etc.
Understand the impact of inflation on mutually exclusive projects with unequal lives.
Make choice between investments under capital rationing.
Illustrate the use of linear programming under capital rationing situation.
The document discusses capital budgeting techniques for evaluating long-term investment projects. It covers the payback period method, net present value (NPV), internal rate of return (IRR), and profitability index. It also discusses circumstances where methods may conflict and how to select the appropriate method. The case study at the end analyzes a machinery replacement project using NPV and IRR to determine if the new equipment should be purchased.
Chapter 9.Risk and Managerial Options in Capital BudgetingZahraMirzayeva
The document discusses capital budgeting and project risk considerations. It defines capital budgeting as the process of identifying, analyzing, and selecting long-term investment projects. The capital budgeting process involves generating proposals, evaluating cash flows, selecting projects, and reevaluating projects. Projects are evaluated using methods like payback period, IRR, NPV, and profitability index. Risk is considered through total risk, variance, standard deviation, and coefficient of variation calculations for project cash flows under different states. Probability trees can also be used to organize possible cash flow streams and joint probabilities.
The document contains 27 multiple choice questions related to capital budgeting techniques including calculating net present value (NPV), internal rate of return (IRR), cash flows, depreciation, taxes, and evaluating investment projects. The questions require calculating financial metrics for new projects and equipment purchases with initial costs and multi-year cash flows to determine which projects should be accepted based on required rates of return and other criteria.
The document discusses various methods for valuing different types of securities. It covers the valuation of debentures, preference shares, and equity shares. For debentures and preference shares, the valuation models discount future interest and principal cash flows to arrive at a present value. For equity shares, the dividend capitalization approach discounts expected future dividends, while the earnings capitalization approach discounts future earnings. Growth must be considered for shares but not for debentures or preference shares that offer fixed cash flows.
The document discusses various capital budgeting techniques used to evaluate investment projects, including payback period, net present value (NPV), and internal rate of return (IRR). It provides examples of how to calculate NPV and IRR using data for two projects (Projects A and B) under consideration by Bennett Company. While NPV is theoretically superior because it incorporates the time value of money, IRR is more commonly used in practice because managers prefer looking at rates of return. Conflicting recommendations between NPV and IRR can occur when projects have non-standard cash flow patterns.
BlueBookAcademy.com Explains Capital Budgetingbluebookacademy
Lets run through the principles of capital budgeting, making sound financial decisions to allocate resources and finances effectively. Capital budgeting is widely used in corporate finance, project appraisal and many other applications. We cover the important concepts of net present values (NPV) and internal rates of return (IRR).
The document discusses capital budgeting, which refers to long-term planning for proposed capital expenditures and their financing. Capital budgeting involves a firm's formal process of acquiring and investing in capital assets. It deals with evaluating long-term investment projects and allocating scarce financial resources among market opportunities. The nature of capital budgeting is that it involves huge investments in fixed assets for long terms that cannot be easily reversed or withdrawn. It is an important tool for financial management and business success depends on how resources are utilized through capital budgeting.
This document provides an overview of key concepts in investment analysis and portfolio management. It discusses what constitutes an investment, factors that influence required rates of return such as time value of money, inflation, and risk. It also covers measures of historical and expected rates of return, risk of expected returns using variance and standard deviation, and the three determinants of required rates of return - the real risk-free rate, expected inflation, and risk premium.
This document discusses multinational capital budgeting. It begins by defining capital budgeting and how it involves allocating resources to maximize returns. For multinational firms, this includes projects located beyond national boundaries. The objectives are then outlined as comparing subsidiary and parent perspectives, demonstrating how to evaluate international projects, and assessing risk. Key considerations for multinational capital budgeting are also reviewed such as exchange rate fluctuations, inflation, financing arrangements, blocked funds, salvage values, competition, government incentives, and real options. Methods for adjusting project assessments for risk are also described.
This document summarizes key concepts from Chapter 1 of the textbook "Investment Analysis and Portfolio Management". It discusses why individuals invest, defines what an investment is, and how to measure the rate of return and risk of investments. It also covers factors that influence required rates of return such as inflation, risk, and different types of risk including business, financial, liquidity, exchange rate, and country risk. Portfolio theory and the relationship between risk and return are also summarized.
The document discusses the estimation of cash flows for capital budgeting and expenditure decisions. It defines capital expenditures as long-term investments like purchasing assets that generate cash flows beyond one year. It also discusses the importance of accurately estimating cash flows, the difficulties involved, and the key principles and components to consider when estimating cash flows for capital projects.
1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
4) It addresses special considerations like how to incorporate inflation, evaluate projects of unequal lengths, and use
This document provides an overview of key concepts from Chapter 1 of the textbook "Analysis of Investment and Management of Portfolio" including:
- Why individuals invest, including balancing present vs. future consumption
- Defining investment and the components of return including time value, inflation, and risk premium
- Calculating historical rates of return through holding period return, yield, arithmetic vs. geometric mean
- Measuring portfolio returns by taking a weighted average of individual investment returns
The summary covers the essential topics and calculations discussed in the chapter introduction on measuring and evaluating investment returns.
Decision making involves choosing a course of action from alternatives to achieve a goal. It is defined as the process of selection from alternatives thought to fulfill the objective of a problem more satisfactorily than others. The process includes 6 steps: 1) recognizing and defining the problem, 2) identifying alternatives, 3) evaluating alternatives, 4) selecting the best alternative, 5) implementing the chosen alternative, and 6) follow-up and evaluation.
Evaluation of Rate Structure Alternatives for the Carlsbad Seawater Desalination Project. Presentation provided at the Special Board of Directors' Meeting at the San Diego County Water Authority on Oct. 11, 2012.
- Cost of capital is the minimum rate of return expected by investors to compensate for the risk of investing in a company. It includes the cost of different sources of financing like debt, preferred stock, common stock, and retained earnings.
- The weighted average cost of capital (WACC) is calculated by weighting the cost of each individual source of capital according to its proportion of total capital structure. WACC is used to evaluate whether potential projects or investments will increase shareholder value.
- Case studies are provided to demonstrate calculating WACC using different capital structures, costs of individual sources, tax rates, and market values. WACC is recalculated based on changes to financing decisions and market conditions.
This document discusses capital budgeting and cash flow analysis techniques. It defines capital budgeting as the planning and control of capital expenditures, particularly long-term investments in fixed assets. Several evaluation techniques are described, including non-discounting methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. Cash flows are categorized as initial, operating, and terminal cash flows. The steps for estimating cash flows and handling replacement project analysis are also outlined.
The document discusses key concepts related to time value of money including:
1) Individuals generally prefer money now rather than in the future due to opportunities for investment, uncertainty around future cash flows, and preferences for current consumption.
2) An individual's time preference for money can be expressed as an interest rate, which allows comparison of cash flows over different time periods.
3) When evaluating financial decisions, it is important to adjust the timing of cash flows to determine their present value using discounting techniques. This allows comparison of cash flows occurring at different points in time.
Show the application of the NPV rule in the choice between mutually exclusive projects, replacement decisions, projects with different lives etc.
Understand the impact of inflation on mutually exclusive projects with unequal lives.
Make choice between investments under capital rationing.
Illustrate the use of linear programming under capital rationing situation.
The document discusses capital budgeting techniques for evaluating long-term investment projects. It covers the payback period method, net present value (NPV), internal rate of return (IRR), and profitability index. It also discusses circumstances where methods may conflict and how to select the appropriate method. The case study at the end analyzes a machinery replacement project using NPV and IRR to determine if the new equipment should be purchased.
Chapter 9.Risk and Managerial Options in Capital BudgetingZahraMirzayeva
The document discusses capital budgeting and project risk considerations. It defines capital budgeting as the process of identifying, analyzing, and selecting long-term investment projects. The capital budgeting process involves generating proposals, evaluating cash flows, selecting projects, and reevaluating projects. Projects are evaluated using methods like payback period, IRR, NPV, and profitability index. Risk is considered through total risk, variance, standard deviation, and coefficient of variation calculations for project cash flows under different states. Probability trees can also be used to organize possible cash flow streams and joint probabilities.
The document contains 27 multiple choice questions related to capital budgeting techniques including calculating net present value (NPV), internal rate of return (IRR), cash flows, depreciation, taxes, and evaluating investment projects. The questions require calculating financial metrics for new projects and equipment purchases with initial costs and multi-year cash flows to determine which projects should be accepted based on required rates of return and other criteria.
The document discusses various methods for valuing different types of securities. It covers the valuation of debentures, preference shares, and equity shares. For debentures and preference shares, the valuation models discount future interest and principal cash flows to arrive at a present value. For equity shares, the dividend capitalization approach discounts expected future dividends, while the earnings capitalization approach discounts future earnings. Growth must be considered for shares but not for debentures or preference shares that offer fixed cash flows.
The document discusses various capital budgeting techniques used to evaluate investment projects, including payback period, net present value (NPV), and internal rate of return (IRR). It provides examples of how to calculate NPV and IRR using data for two projects (Projects A and B) under consideration by Bennett Company. While NPV is theoretically superior because it incorporates the time value of money, IRR is more commonly used in practice because managers prefer looking at rates of return. Conflicting recommendations between NPV and IRR can occur when projects have non-standard cash flow patterns.
BlueBookAcademy.com Explains Capital Budgetingbluebookacademy
Lets run through the principles of capital budgeting, making sound financial decisions to allocate resources and finances effectively. Capital budgeting is widely used in corporate finance, project appraisal and many other applications. We cover the important concepts of net present values (NPV) and internal rates of return (IRR).
The document discusses capital budgeting, which refers to long-term planning for proposed capital expenditures and their financing. Capital budgeting involves a firm's formal process of acquiring and investing in capital assets. It deals with evaluating long-term investment projects and allocating scarce financial resources among market opportunities. The nature of capital budgeting is that it involves huge investments in fixed assets for long terms that cannot be easily reversed or withdrawn. It is an important tool for financial management and business success depends on how resources are utilized through capital budgeting.
This document provides an overview of key concepts in investment analysis and portfolio management. It discusses what constitutes an investment, factors that influence required rates of return such as time value of money, inflation, and risk. It also covers measures of historical and expected rates of return, risk of expected returns using variance and standard deviation, and the three determinants of required rates of return - the real risk-free rate, expected inflation, and risk premium.
This document discusses multinational capital budgeting. It begins by defining capital budgeting and how it involves allocating resources to maximize returns. For multinational firms, this includes projects located beyond national boundaries. The objectives are then outlined as comparing subsidiary and parent perspectives, demonstrating how to evaluate international projects, and assessing risk. Key considerations for multinational capital budgeting are also reviewed such as exchange rate fluctuations, inflation, financing arrangements, blocked funds, salvage values, competition, government incentives, and real options. Methods for adjusting project assessments for risk are also described.
This document summarizes key concepts from Chapter 1 of the textbook "Investment Analysis and Portfolio Management". It discusses why individuals invest, defines what an investment is, and how to measure the rate of return and risk of investments. It also covers factors that influence required rates of return such as inflation, risk, and different types of risk including business, financial, liquidity, exchange rate, and country risk. Portfolio theory and the relationship between risk and return are also summarized.
The document discusses the estimation of cash flows for capital budgeting and expenditure decisions. It defines capital expenditures as long-term investments like purchasing assets that generate cash flows beyond one year. It also discusses the importance of accurately estimating cash flows, the difficulties involved, and the key principles and components to consider when estimating cash flows for capital projects.
1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
4) It addresses special considerations like how to incorporate inflation, evaluate projects of unequal lengths, and use
This document provides an overview of key concepts from Chapter 1 of the textbook "Analysis of Investment and Management of Portfolio" including:
- Why individuals invest, including balancing present vs. future consumption
- Defining investment and the components of return including time value, inflation, and risk premium
- Calculating historical rates of return through holding period return, yield, arithmetic vs. geometric mean
- Measuring portfolio returns by taking a weighted average of individual investment returns
The summary covers the essential topics and calculations discussed in the chapter introduction on measuring and evaluating investment returns.
Decision making involves choosing a course of action from alternatives to achieve a goal. It is defined as the process of selection from alternatives thought to fulfill the objective of a problem more satisfactorily than others. The process includes 6 steps: 1) recognizing and defining the problem, 2) identifying alternatives, 3) evaluating alternatives, 4) selecting the best alternative, 5) implementing the chosen alternative, and 6) follow-up and evaluation.
Evaluation of Rate Structure Alternatives for the Carlsbad Seawater Desalination Project. Presentation provided at the Special Board of Directors' Meeting at the San Diego County Water Authority on Oct. 11, 2012.
This document discusses the evaluation of rate structure alternatives for the Carlsbad Seawater Desalination Project. It provides an overview of the process undertaken since April 2012 to analyze different rate structures and get feedback from the Board of Directors. The next steps outlined are to conduct a cost of service study beginning in December 2012 and establish a workgroup to discuss allocating desalination costs and potential fixed charge modifications for the rate structure. A recommendation will be provided to the Board by mid-2013.
Situational Analysis: An Emerging Tool for Uncovering Theoretical ComplexityChristopher Beasley
Situational analysis is an emerging tool that extends grounded theory to understand the complex context surrounding events rather than just the events themselves. It uses situational, social worlds/arenas, and positional maps to analyze relationships between human and non-human elements, collective entities, discourses between them, and positions taken within the situation. The goal is to develop complex situation-specific and adaptive systems theories to aid communities. Future work involves combining local theories into universal models.
The document outlines an 8-step process for decision making: 1) identify the problem, 2) identify decision criteria, 3) allocate weights to criteria, 4) develop alternatives, 5) analyze alternatives, 6) select an alternative, 7) implement the alternative, and 8) evaluate the decision's effectiveness. It also discusses types of problems (structured vs unstructured), decision styles, and using intuition in decision making. The goal is to make informed choices by systematically considering alternatives and criteria.
Simon's model of problem solving consists of three phases - intelligence, design, and choice. In the intelligence phase, the problem is identified and defined. In the design phase, alternatives are generated and evaluated. In the choice phase, the best alternative is selected. Decision making strategies include optimizing, satisficing, and incrementalism. Heuristics can introduce biases like availability, adjustment and anchoring, and representativeness. Decision support systems aim to increase rationality by improving access to relevant information and the ability to evaluate alternatives.
Decision making involves choosing between multiple alternatives to solve a problem. It is influenced by perceptions and occurs through various models and processes. Key aspects of decision making include identifying problems, developing alternatives, evaluating options, and taking action. Decision making in organizations faces constraints like time pressures and past precedents. While individuals can be biased, groups can potentially make higher quality decisions by considering more information and viewpoints, though they also have disadvantages like time costs. Techniques like brainstorming aim to improve group decision making outcomes.
Decision making involves selecting a course of action from alternatives to achieve predetermined objectives. It is a managerial function that facilitates business policies and efficient performance. Problem solving is concerned with overcoming obstacles and may or may not require action. It involves discovering, analyzing, and solving issues. Key aspects of decision making and problem solving include understanding the problem, developing alternatives, selecting the best option, and reviewing the results. Common techniques used are brainstorming, hypothesis testing, and trial and error.
The document discusses the key steps in the decision making process: [1] identifying the problem and criteria for evaluating alternatives, [2] developing and analyzing potential alternatives, and [3] selecting, implementing, and evaluating the alternative chosen to resolve the problem. It covers identifying structured vs. unstructured problems, programmed vs. non-programmed decisions, and models of rational vs. intuitive decision making. The document also discusses different decision making styles and criteria that may be weighted to analyze alternatives.
Determining the Impact of Country Of Origin on Filipino Yuppies' Evaluation o...Joses Sacilioc
This document summarizes a study that aimed to understand how the country of origin impacts Filipino young professionals' evaluation of mobile phone alternatives. The study found that country of origin does not have a significant impact on key individual differences like brand image, purchase inclination, loyalty, and quality assessment. While some countries had stronger perceptions for certain attributes, country of origin overall was independent from individual differences. The recommendations were to highlight country-specific strengths in marketing but not emphasize country of origin itself, and conduct further research with larger samples.
The document discusses decision making as the essence of a manager's job. It outlines the key steps in the decision making process as identifying problems, criteria, alternatives, selecting an alternative, implementing it, and evaluating. Decision making can involve structured problems with clear goals or unstructured problems. Managers use rational decision making but are bounded by limited information processing. Intuition also plays a role in decision making based on experience. Decision conditions can involve certainty, risk or uncertainty. The document discusses different decision making styles and potential biases.
The document summarizes a city council workshop presentation on Oak Harbor's wastewater treatment facilities plan. It provides an overview of the project schedule and evaluation process for identifying preliminary alternatives. Thirteen initial alternatives were developed combining two treatment process options, eight potential plant sites, and three outfall locations. The alternatives were evaluated using a triple bottom line plus analysis considering financial, social, environmental, and technical criteria. Based on this, six alternatives were within 10% cost of the lowest option. Four sites - Windjammer Park, Marina, Old City Shops, and Beachview Farm - were proposed for further evaluation to identify the preferred alternative and site.
situational analysis of MDGs 4,5 and 6 in NepalKamal Budha
This document analyzes the situational progress of Nepal toward achieving Millennium Development Goals 4, 5 and 6 related to child mortality, maternal health, and major diseases. It provides data on key indicators for each goal between 1990-2015, showing that Nepal has made progress in reducing child and maternal mortality rates and increasing immunization coverage, though some targets remain to be achieved by 2015. The document also examines indicators related to combating HIV/AIDS and malaria in Nepal.
The document outlines the 5 stages of the consumer buying process:
1) Need recognition - the consumer becomes aware of a problem or need.
2) Information search - the consumer searches for information internally and externally to learn about possible alternatives.
3) Evaluation of alternatives - the consumer evaluates the different alternatives based on attributes and decides on a preferred choice.
4) Purchase decision - the consumer decides on a specific product, brand, store, and purchase method.
5) Post-purchase evaluation - after the purchase, the consumer evaluates satisfaction with their decision and the product.
Situational analysis in health care industryAbhi Manu
The document discusses various techniques for conducting situational analysis in healthcare. It defines situational analysis as the systematic collection and study of past and present data to identify trends and conditions that can influence business performance and strategy choices. For healthcare, situational analysis describes and analyzes the health status and services in an area to assess how well services address needs. It also prioritizes problems to inform planning. Common techniques include 5C analysis, PEST analysis, Porter's Five Forces, and SWOT analysis. The summary provides an overview of how each technique is applied to understand strengths, weaknesses, opportunities and threats to better plan healthcare services.
The document provides an overview of frameworks and tools for conducting a situational analysis as part of strategic marketing. It discusses the 5 C's analysis framework which allows managers to understand customers, the company, competitors, context, and collaborators/complementers. It also covers Porter's Five Forces analysis and other tools such as scenario planning, market structure analysis, and timeline cause-and-effect analysis. The situational analysis information is then organized and prioritized through a SWOT analysis to identify critical strategic factors.
Situational analysis, Business strategy and BCG matrixPinnakk Paul
The document discusses situational analysis and two methods for conducting situational analysis: 5Cs analysis and Porter's five forces analysis. 5Cs analysis examines a company, customers, competitors, collaborators, and the broader climate/environment. Porter's five forces model analyzes the threat of new entrants, threat of substitutes, bargaining power of suppliers and customers, and competitive rivalry within an industry. The document provides details on how to apply each method and examples of factors to consider for each element of the analyses.
The document discusses project risk management and risk-informed decision making. It describes identifying alternatives, analyzing risks of alternatives, and selecting alternatives based on risk analysis. Key steps include identifying objectives and constraints, compiling alternatives, choosing analysis methods, conducting risk assessments, developing risk-normalized performance commitments, deliberating alternatives, and selecting an alternative.
This presentation provides an overview of the basic principles and calculations often used in developing a financial justication analysis as part of a Business Case. Topics covered include:
- Pre-Tax Cash Flow
- Payback Period
- Accounting Terms and Principles
- Depreciation Methods
- After-Tax Cash Flow
- Discounted Cash Flow
- Net Present Value
- Internal Rate of Return
- Modified Internal Rate or Return
- Economic Value Added
- Packaging the Business Case
From the given information, calculate the profitability index of the project:
- Initial investment required is Rs. 50 lacs
- Present value of future cash flows are:
Year 1: Rs. 9,09,000
Year 2: Rs. 9,91,680
Year 3: Rs. 11,25,950
Year 4: Rs. 12,29,460
Year 5: Rs. 15,52,250
Total present value of future cash flows = Rs. 58,09,340
Profitability Index = Present value of future cash flows / Initial investment
= Rs. 58,09,340 / Rs. 50,00,000
= 1.1618
Therefore, the
The document discusses various topics related to investment decisions and capital budgeting. It defines capital expenditures and discusses factors like cost of acquisition, addition/expansion costs, and R&D costs. It also summarizes various capital budgeting techniques like payback period, accounting rate of return, net present value, internal rate of return, and profitability index. Key evaluation criteria for investment decisions include NPV, IRR, and reconsider assumptions. The document also highlights potential conflicts between NPV and IRR methods.
This document discusses various methods for financial analysis and project selection. It describes numeric models such as net present value (NPV), internal rate of return (IRR), payback period, accounting rate of return (ARR), and return on investment (ROI). It also discusses non-numeric models like sacred cow, operating necessity, and competitive necessity. The key techniques in numeric models are then explained in more detail, including discounting cash flows, calculating NPV, determining payback periods, and how to use these models to evaluate investment projects. Examples are provided to illustrate how to apply these financial analysis methods.
This document discusses capital budgeting and methods for evaluating long-term investment projects. It defines capital budgeting as evaluating investments that maximize owner wealth over multiple years. Several evaluation methods are described, including payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI). The document recommends using NPV, as it considers all cash flows and their timing, incorporating the time value of money to determine the true profitability of investments.
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.
This document provides an overview of various project selection methods. It discusses project selection criteria and process. Key methods covered include payback period, average rate of return, net present value, internal rate of return, and profitability index. Examples are provided to demonstrate calculating each method. The document concludes that the profitability index can be used to compare potential projects, with a higher index indicating a more attractive investment.
The document discusses capital structure and capital budgeting. It defines capital structure as the arrangement of capital from different sources to fund long-term business needs. It then discusses various factors that determine capital structure like risk, cost of capital, control, and business nature. The document also defines capital budgeting as evaluating potential projects and investments, and discusses techniques used like net present value, internal rate of return, and payback period. It emphasizes estimating incremental cash flows by considering project cash flows with and without the investment.
Management Accounting: A Road of Discovery discusses capital budgeting and the balanced scorecard. It explains the need for multiple capital budgeting methods like net present value (NPV) and accounting rate of return (ARR) to evaluate investments. A balanced scorecard uses non-financial measures from four perspectives - financial, customer, internal processes, and innovation/learning - to assess long-term value in addition to traditional financial metrics. The document provides examples of goals and measures for each balanced scorecard perspective from various companies.
The discounted payback period is 3 years. In year 3, the cumulative discounted cash flows of $3,636 + $3,719 + $7,513 = $14,868 exceeds the initial investment of $10,000.
The document discusses various capital budgeting techniques used to evaluate investment projects, including net present value (NPV), payback period, internal rate of return (IRR), and profitability index (PI). It provides definitions and explanations of each method. The key steps in a typical capital budgeting process are identified as idea generation, analyzing proposals, creating a capital budget, and monitoring decisions. The importance of using good capital budgeting techniques to increase competitiveness and shareholder wealth is highlighted. Challenges with some methods and how results can differ between IRR and NPV for certain types of projects are also covered.
Okay, let's calculate this step-by-step:
* Salvage value of the asset = $600,000
* Book value of the asset in year 4 = $500,000
* Gain on sale of asset = Salvage value - Book value = $600,000 - $500,000 = $100,000
* Tax rate = 30%
* Tax on gain = Gain x Tax rate = $100,000 x 30% = $30,000
* After-tax salvage value = Salvage value - Tax on gain = $600,000 - $30,000 = $570,000
Therefore, the after-tax salvage value of the asset is $570,
The document discusses various capital budgeting techniques used to evaluate investment projects, including:
1) The cash payback period method which calculates the years to recover initial costs from annual cash flows.
2) The net present value method which discounts future cash flows to determine if a project's present value exceeds costs.
3) The internal rate of return method which calculates the discount rate that sets a project's present value of cash flows equal to its costs.
4) The annual rate of return and profitability index methods which evaluate profitability as a percentage of investment size. Post-audits of actual results are recommended to improve future investment analyses.
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.
This document discusses key financial concepts used to evaluate business investment decisions, including cash flow, net present value (NPV), internal rate of return (IRR), payback period, and discount rate. It provides examples of how to calculate NPV, IRR, payback period using cash flows with different time periods and discount rates. The document also presents a sample exercise calculating these metrics to analyze the potential costs savings and profitability of a $10 million investment proposal aimed at reducing water and energy consumption for a food company.
The document discusses various capital budgeting techniques used to evaluate investment projects, including payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI). It also covers capital structure, which refers to the mix of debt and equity used to finance long-term operations. Different theories of capital structure are presented, including the net income theory, net operating income theory, and traditional theory. The optimal capital structure balances minimum cost of capital with maximum return and safety.
Capital expenditures (CAPEX) are funds used by a company to acquire or upgrade physical assets like equipment, property, or buildings to generate future benefits. CAPEX is evaluated using capital budgeting techniques like net present value (NPV) analysis, which discounts future cash flows to determine if a project's value exceeds its cost. The capital expenditure process involves generating investment proposals, evaluating proposals using methods like NPV, approving projects, and conducting post-completion audits to review project performance.
Capital budgeting is the process of evaluating long-term investment projects. It involves analyzing expenditures that will generate benefits over multiple years. The key steps in capital budgeting are project proposal, review and analysis, decision making, implementation, and follow-up. Techniques for evaluating projects include payback period, net present value (NPV), and internal rate of return (IRR). NPV and IRR are more sophisticated as they discount cash flows to determine if a project will earn a return higher than the firm's cost of capital.
This introductory revision presentation guides students through the concept of basic investment appraisal. It examines the nature of capital investment spending and then outlines three common approaches to investment appraisal: payback period, net present value and accounting rate of return. Some key evaluative points relating to investment appraisal are also discussed.
Here are the steps to calculate the IRR:
1) Construct a cash flow timeline showing the initial investment of $52,125 and the annual cash inflows of $12,000 for 8 years.
2) Guess a discount rate and calculate the NPV (e.g. 10% gives a negative NPV)
3) Adjust the discount rate until the NPV is as close to zero as possible (the IRR)
4) The IRR for this project is approximately 13.5%
Since the IRR of 13.5% is greater than the cost of capital of 12%, this project should be accepted according to the IRR method.
This document outlines the six steps of performance measurement: 1) Separate strategic goals into input and output dimensions, 2) Develop output measures for each goal, 3) Develop input measures for each goal, 4) Check measures against the SAVI framework, 5) Use an effective recognition system, and 6) Build an organizational culture that supports improvement. Key aspects of a good measurement system include focusing on effectiveness, objectives, and key performance indicators related to factors like customers, products, and finances. Input and output measures should be linked to categories like speed, accuracy, volume, and investment.
This document discusses measuring progress towards goals. It introduces performance measurement and explains that measuring progress scientifically captures desirable changes in performance areas. It outlines key aspects of developing a measurement system, including measuring activity levels and results. Good performance measures should be measurable, observable, reliable, controllable, and active. The document provides examples of measuring performance for buses, budgets, restaurants, grocery stores, and car dealerships using the four dimensions of speed, accuracy, volume, and investment.
The document discusses how to present a business case and make choices. It outlines a problem-solving model that involves defining the problem and criteria, evaluating alternatives through non-financial and financial analysis, making a choice, and implementing a plan with follow up. The document provides guidance on evaluating alternatives both financially and non-financially. It emphasizes the importance of planning implementation, controlling results through variance analysis, and effectively presenting the business case.
This document discusses criteria for evaluating options and making decisions. It covers establishing decision criteria in multiple areas: financial, social/stakeholders, sustainability, environment, safety, customers. For each area, it lists sub-criteria and concepts for measurement. Financial criteria include returns, costs, value. Environmental criteria include emissions and waste. Social criteria include employment, culture, quality of life. Customer service criteria include satisfaction, impacts on customers. Risk is also an important criteria to consider. The document provides frameworks to comprehensively evaluate projects across these criteria.
This document discusses decision-making and realizing goals through screening added value initiatives. It introduces the SAVI model for evaluating initiatives and outlines the components of a business case analysis for decision making. Key steps in the process include properly defining the problem, identifying goals and criteria, evaluating alternatives through financial and non-financial analysis, and selecting an option to implement along with follow up. The overall framework aims to systematically evaluate initiatives against strategic goals to identify the best solution.
This chapter discusses setting goals and managing change through goal cascading. It emphasizes that goals must be specific, measurable, achievable, results-oriented and time-bound. Goals cascade from high-level strategic goals set at the corporate level down to functional objectives and action plans at the operating level. Effective goal measurement shows progress and justifies further investment. While goals across divisions may compete, balancing priorities is key to managing change through either paradigm shifts or incremental shaping toward goals over time.
This chapter discusses critical success factors from an industry and organizational perspective. It introduces models for analyzing the industry environment, including stages of industry evolution, to identify industry critical success factors. It also presents the SWOT analysis tool to match industry factors with an organizational profile and determine strategic approaches based on the organization's internal strengths and weaknesses and external opportunities and threats.
This document discusses the strategic planning process and environmental analysis. It outlines examining the remote, industry, and local environments to understand challenges and opportunities. The remote environment considers economic, social, political, and technological issues. Industry analysis looks at the five competitive forces. The local environment analyzes issues specific to an individual organization. The document also discusses profiling an organization by identifying major areas of strength and weakness.
The document discusses developing a vision, mission, and values for an organization. It provides examples of elements to include in a vision statement like who the organization is and what it provides. It also gives examples of components of a mission statement such as the products/services, customers, and expected results. Finally, it lists examples of organizational values around how employees and customers should be treated to help govern work. The overall purpose is to define these key elements to guide the organization's goals and priorities.
This document discusses the SAVI model for strategic management and goal setting. It introduces SAVI as an acronym that stands for speed, accuracy, volume, and investment. The SAVI model focuses on setting goals to provide added value to stakeholders. It describes the management cycle of goal setting, decision making and control, and performance measurement. The document provides details on each step of the SAVI model, including defining the vision, mission, values, opportunities/challenges, and critical success factors to develop corporate and operating goals. It emphasizes that goals should focus on sustainability, safety, stewardship, satisfaction, and profits.
This chapter discusses performance measurement and management in organizations. It outlines the benefits of performance measurement, such as performance planning, increased effectiveness of supervision, and improved employee morale. However, it also notes pitfalls like negative attitudes towards measurement. The chapter emphasizes that positive, immediate, and certain consequences are the most powerful motivators for employees' performance and behaviors. Overall, it stresses that good performance management involves defining goals, monitoring rewards systems, and cultivating a culture where people feel safe and rewarded for change.
This chapter discusses performance measurement and management in organizations. It outlines the benefits of performance measurement, such as performance planning, increased effectiveness of supervision, and improved employee morale. However, it also notes pitfalls like negative attitudes towards measurement. The chapter emphasizes that positive, immediate, and certain consequences are the most powerful motivators for employees' performance and behavior. Overall, it stresses that good performance management involves defining goals, monitoring rewards systems, and cultivating a culture where people feel safe and rewarded for change.
This document discusses the SAVI model for strategic management and goal setting. It introduces SAVI as an acronym that stands for speed, accuracy, volume, and investment. The SAVI model focuses on setting goals to provide added value to stakeholders. It describes the management cycle of goal setting, decision making and control, and performance measurement. The document provides details on defining goals at both the corporate and operating levels to address challenges, opportunities, and critical success factors. It also outlines the benefits and risks of using the SAVI strategic goal setting process.
The document discusses developing a vision, mission, and values for an organization. It provides examples of elements to include in a vision statement like who the organization is, what it provides to customers, and how it operates. It also gives examples of components of a mission statement such as the products/services, customers, and expected results. Finally, it lists examples of organizational values around how employees and customers should be treated and how people in the organization will work. The overall purpose is to provide guidance on defining these key elements to guide an organization's goals and operations.
2. The Decision-Making Model.
PROBLEM STATEMENT
PROBLEM STATEMENT
CRITERIA
CRITERIA
ALTERNATIVES
ALTERNATIVES
NON-FINANCIAL ANALYSIS
NON-FINANCIAL ANALYSIS FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
MAKE A CHOICE
MAKE A CHOICE
IMPLEMENTATION PLAN &
IMPLEMENTATION PLAN &
FOLLOW UP
FOLLOW UP
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3. Financial analysis is
complex
• Financial analysis deserves special
consideration for two reasons.
– Firstly, it is often regarded as the most
complex part of the evaluation process and
– secondly, financial efficiency and
effectiveness are very powerful strategic goals
3
4. REASONS FOR FINANCIAL
EVALUATION
– The purpose of this chapter is to enhance
your understanding of financial evaluation so
that you can:
• initiate and perform financial evaluations in support
of the analysis of decision alternatives,
• understand the implications on the business
decision of cash flow estimates into the future,
• develop a sufficient understanding of financial
analysis to be able to incorporate financial
considerations in the business case.
4
5. REASONS FOR FINANCIAL
EVALUATION
• There are two objectives of financial
evaluation:
• To array
• To quantify the expected results
– Financial evaluation is the comparison of
investment costs to financial benefits
received.
5
6. INVESTMENT COSTS
DEFINED
• A cost is defined as a resource used to
achieve an objective.
• In general terms, any cost could
represent:
• an increase or potential increase in capacity
• a decrease or potential decrease in operating
costs
• a change in processes or procedures for technical
improvement alone
• a change in processes or procedures to satisfy
non-quantitative factors. 6
7. INVESTMENT COSTS
DEFINED
• There are five key points associated with
this definition of investment costs.
1. Investment costs are not just capital.
2. Investments represent a change in future
conditions.
3. Investments relate to corporate objectives
and business unit strategies.
4. Investments deal in a world of uncertainty.
5. Investment benefits and costs are assumed
to be quantifiable.
7
8. COST OF CAPITAL DEFINED
• "Cost Of Capital" (also called "hurdle
rate") is more appropriately thought of as
an opportunity cost of capital.
8
9. COST OF CAPITAL DEFINED
• The investment hurdle rate calculation
used by industry is:
The prime lending rate (the rate for rented money)
plus a premium for general economic risk (inflation)
plus a premium for economic risk faced in this
industry
plus a premium for risk faced in dealing with assets
of this type,
9
10. CASH FLOW ANALYSES
• Time Value of Money
• It is necessary to modify the streams of
benefits and costs so that they can be
compared at a single point in time. The
comparison is termed "Discounted Cash
Flow".
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11. DISCOUNTED CASH FLOW
• The objective is to compare cash streams
at a single point in time with reference to
the established hurdle rate.
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12. Simple Interest Example
• An investment is made and the proceeds from
interest are withdrawn at the end of each year.
• When considering an investment of $1,000
made at an interest rate of 12% for 5 years, the
simple interest return on the investment is:
Simple Interest = P x i x n
Simple Interest = l000 x .12 x 5
Simple Interest = $600
(The simple interest formula assumes that the interest return
on the $1,000 is not reinvested.)
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13. DISCOUNTED CASH FLOW
• Compound Interest Example
• Consider this time that the annual return
on our $1000 investment is reinvested.
The value at the end of 5 years, where "S"
is the compound sum is calculated as
follows.
S = P x (l+i)n
S = l000(l+.12)5
S = 1000 x l.76234
S = $1762.34
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14. DISCOUNTED CASH FLOW
• Present Value Example
• In order to conduct an analysis of cash flow into
the future, we need to take a mirror image of
“compounding” so that we can see how much
value there is today in the prospect of receiving
cash some time in the future.
• A series of tables are presented in the
following figures for discussion.
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15. DISCOUNTED CASH FLOW
– Figures 8.2 and 8.3 show the present value of
dollars to be received in the future.
– $1.00 to be received in 20 years in a 10%
world is the same as $.149 to be received
today. $1.00 to be received in 20 years in the
30% world is the same as $.005 today.
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16. DISCOUNTED CASH FLOW
• Figures 8.4 & 8.5, “Compound Amounts”
shows how money accumulates over time
using the cost of capital as the investment
rate.
• In a 10% world, one dollar will accumulate
to $6.727 in 20 years, and in a 30% world
one dollar will accumulate to $190.05 in 20
years.
16
17. DISCOUNTED CASH FLOW
• The discount rate or “Opportunity Cost of
Capital” incorporates the financial risks of
a project in three ways:
• The streams of benefits in the form of either
savings or revenues are not entirely predictable.
• The value of money changes in terms of
inflationary purchasing power.
• There is some uncertainty about the changing
"rental rate" for funds.
17
18. CASH FLOW ESTIMATES
• Keep in mind that "sunk costs" (those
relating to an investment that have already
been made), are not relevant to the
decision at hand.
18
19. Types of Cash Flows
• Cash outflows: (expenditures made to
start the project and keep it going for its
whole life)
– Initial investment
– Recurring maintenance costs
– Recurring operating costs and negative
benefits
– Periodic improvement costs
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20. Types of Cash Flows
• Cash inflows: (financial benefits received
from the project for its whole life)
– Incremental Revenues
– Incremental Savings
– Proceeds on Disposal
• We deal only with cash inflows and
outflows that are directly attributable to the
decision at hand.
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21. ANNUAL CASH INFLOWS
PRESENT
VALUE FACTOR
dollars 0 1 2 3 4 5
INITIAL 400,000 1.000 (400,000)
INVESTMENT
136,350 .909 150,000
123,900 .826 150,000
Present value of 112,650 .751 150,000
annual cash
flows
102,450 .683 150,000
93,150 .621 150,000
TOTAL 568,500
BENEFITS (sum of the present values of cash inflows)
NET PRESENT $168,500
VALUE (difference between the present value of inflows and the initial investment)
BENEFIT COST RATIO = $568,500/$400,000 = 1.42
PAYBACK PERIOD IS $400,000/$150,000 = 2.67 YEARS
INTERNAL RATE OF RETURN IS 25.41%
21
22. Net Present Value (NPV)
• The Net Present Value of an expenditure
is determined by subtracting the sum of
the discounted costs from the discounted
benefits. In formula terms:
• Net Present Value = Sum of Discounted
Benefits ‑ Sum of Discounted Costs
22
23. Benefit/Cost Ratio
• The ratio between the sum of the discounted
benefits and the sum of the discounted costs. If
the Benefit/Cost ratio is greater than 1, then the
project is viable from the financial point of view.
• This simple variation of Net Present Value
assists in ranking a series of investment projects
that are being reviewed.
23
24. Payback or Payout
• The concept of payback or payout does not
require using discounted cash flow information.
• We are less certain of predictions as they are
made farther into the future. Therefore, an
investment that generates sufficient cash
benefits to pay for itself early in its life is less
risky than one that takes longer to pay for itself.
24
25. Internal Rate of Return
• The internal rate of return is the true rate
of interest earned by the investment.
• A $400,000 investment that earns
$150,000 per year for 5 years is yielding a
25.41% rate of return. When we compare
this to the hurdle rate of 10% we are
performing well.
25
26. Comparing Alternatives
• All three of the discounted cash flow
methods may be used to rank alternatives.
However, the user of a financial evaluation
must be aware of what the methods
indicate.
26
27. Comparing Alternatives
– Net present value is the conceptually superior
method.
– The benefit cost ratio has the advantage of
enabling comparison of projects of different
sizes
– cash payback illustrates the amount of time
that you are at risk.
– The internal rate of return lets you test the
integrity of the discount rate.
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28. Critical value analysis
• Critical value analysis is a method of
evaluation that is useful when the benefits
or costs of a project are non-financial in
nature
28
29. Marginal value analysis
• As a final measure of the quality of
benefits we should attempt to identify the
marginal benefits that flow from marginal
dollars. We might be able to attract 90% of
the benefits by spending 50% of the
dollars.
29
30. Chapter Summary
• There are a wide variety of methods for
evaluating expenditure alternatives. Some
rely on monetary values and financial
evaluation; some rely on qualitative
analysis and intrinsic evaluation.
30
31. Chapter Summary
• The analysis and evaluation of alternatives to an
expenditure initiative must be:
• balanced/objective
• realistic/attainable
• easily understood
• appropriate for the situation.
• We also discovered that financial evaluation can be fairly
complicated. It is hoped that the spreadsheet provided
as a supplement to this chapter, will make financial
valuation much easier. (see appendix to chapter 8).
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32. Closing Remarks
• The next step is to make a choice. If our non-
financial and financial evaluation has been
accurate and relevant, making a choice will be
easy. If our evaluation systems are flawed,
making a choice may be impossible.
• Chapter 9 will deal with making choices and
developing action plans so that choices are
followed through.
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