What is the capital budgeting decision concerned with?
NPV = PV Cash flows - _________ investment
Formula for NPV
The discount rate used to discount set of cash flows must match the rate of the cash flow
Two things to determine with NPV
Managers increase shareholders' wealth by accepting all projects worth more than they cost
Anything with positive net present value should be accepted to increase shareholder wealth
What is Payback
What is discounted payback period
Define Internal Rate of Return
Define: Investment Timing Decision
What is needed when comparing assets with different lives?
Define Capital Rationing
Soft Rationing vs Hard Rationing
NPV is the only measure which always gives correct decision when evaluating project