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900777
NPV and other Investment Criteria
Description
Mind Map on NPV and other Investment Criteria, created by tush991 on 19/05/2014.
Mind Map by
tush991
, updated more than 1 year ago
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Created by
tush991
almost 10 years ago
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Resource summary
NPV and other Investment Criteria
Capital Budgeting
Annotations:
Analysis of any potential addition of fixed assets, long term, high cost
Steps
Estimating Cash Flows
Estimating risk of CFs and determining appropriate cost of capital
Evaluate projects and accept or reject
Criteria
Time Value of Money?
Risk Adjust?
Creates Value?
Valuation Criteria
Net present Value
Annotations:
Difference in investments market value and cost. If NPV for future cash flows within a certain time span is positive, investment is viable
Discounted Cash Flow Valuation
Annotations:
Cash flow after discounting. Find the Present value of future cash flows
Payback Period
Annotations:
Number of years req. to recover costs. Accept if it is within a pre-set limit
Strenghts
Weaknesses
Discounted Payback Period
Average Accounting Ratio (profitability Ratio)
Strenghts
Weaknesses
IRR
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