Contents
• Capital budgets as opposed to revenue budgets
• Different kinds of capital budgets – non-productive assets, improving operating efficiency and capital projects
• Choosing capital projects – Conventional and Discounted Cash Flow techniques
• Payback period, Discounted payback period, Net Present Value, Internal Rate of Return, Profitability Index methods
• Assumptions underlying different methods
• Introduction to IRR vs. NPV
• Incremental cash flow principle for evaluation of replacement decisions
• Numerical exercises on incremental cash flows, NPV, IRR, Discounted payback period and Profitability Index
At the end of the chapter the student will be able to:
• Apply incremental cash flow principle to a replacement decision
• Apply conventional as well as DCF techniques to capital investment decisions
• Determine NPV for a given project and fix the range of rates between which IRR for a given set of projections would lie
• Understand how IRR readily offers itself for fixing Equated installments on a loan at a given rate of interest, duration and periodicity like monthly or quarterly
Download Full Notes
• Capital budgets as opposed to revenue budgets
• Different kinds of capital budgets – non-productive assets, improving operating efficiency and capital projects
• Choosing capital projects – Conventional and Discounted Cash Flow techniques
• Payback period, Discounted payback period, Net Present Value, Internal Rate of Return, Profitability Index methods
• Assumptions underlying different methods
• Introduction to IRR vs. NPV
• Incremental cash flow principle for evaluation of replacement decisions
• Numerical exercises on incremental cash flows, NPV, IRR, Discounted payback period and Profitability Index
At the end of the chapter the student will be able to:
• Apply incremental cash flow principle to a replacement decision
• Apply conventional as well as DCF techniques to capital investment decisions
• Determine NPV for a given project and fix the range of rates between which IRR for a given set of projections would lie
• Understand how IRR readily offers itself for fixing Equated installments on a loan at a given rate of interest, duration and periodicity like monthly or quarterly
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