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[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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NPV = -Initial Investment – PV(Maintenance) + PV(Depreciation Tax Shield) = -$60,000 - $4,065 + $13,134 = -$50,931. In order to calculate the equivalent annual cost (EAC), set the net present value of the project equal to a five-year annuity. Solve for the payment amount, which is the equivalent annual cost.-$50, 931 = EAC * A50.18. EAC ...
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[DOC File]Chapter 8
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The Internal Rate of Return. Internal rate of return (IRR) – the rate that makes the present value of the future cash flows equal to the initial cost or investment. In other words, the discount rate that gives a project a $0 NPV. IRR decision rule – the investment is acceptable if its IRR exceeds the required return.
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[DOC File]Capital Budgeting
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NPV VS IRR: Both NPV and IRR decision rules consider all of the projects cash flows and the Time value of Money. Only the Net Present Value Decisions rule will always lead to the correct decision when choosing among Mutually Exclusive Projects. This is because the NPVand IRR decision rules differ with respect to their Reinvestment Rate Assumptions.
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[DOC File]Chapter 1: Financial Management in Context
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The typical analyses are payback period analysis, net present value (NPV), and internal rate of return (IRR). Payback Period Analysis. Easy to calculate but is the least sophisticated because it does not take into account the effects of time on money. Payback Period = Year before recovery period + unrecovered cost at beginning of year . cash ...
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[DOC File]Chapter 10
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Calculate net present value (NPV) and internal rate of return (IRR) for a given project and evaluate each method. Define NPV profiles, the crossover rate, and explain the rationale behind the NPV and IRR methods, their reinvestment rate assumptions, and which method is better when evaluating independent versus mutually exclusive projects.
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[DOC File]Chapter 9 Making Capital Investment Decisions
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Calculate the project’s Payback, NPV, and IRR (base-case). Scenario analysis: Suppose the company believes that all of its estimates (sale quantity, price, variable cost/unit, and fixed cost) are …
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[DOC File]What is Capital Budgeting - exinfm
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The internal rate of return (IRR) is a popular method in capital budgeting. The IRR is a discount rate that makes the present value of estimated cash flows equal to the initial investment. However, when using the IRR, you should make sure that the calculated IRR is …
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[DOC File]Chapter 1 -- An Introduction To Financial Management
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Ranking problem (conflict): NPV approach and IRR approach sometimes will lead to different rankings for mutually exclusive projects. For example, using NPV approach, project L is better than project S if the cost of capital is 10% (L has a higher NPV than S). Other the other hand, using IRR approach, S is better than L (S has a higher IRR than L).
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[DOC File]Texas Tech University
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(11-5) NPV vs. IRR C I Answer: e MEDIUM. 6. Suppose a firm relies exclusively on the payback method when making capital budgeting decisions, and it sets a 4-year payback regardless of economic conditions. Other things held constant, which of the following statements is most likely to be true? a.
roi vs irr vs npv

Irr vs npv vs payback