Invt Decision Rules (Chap 7).pptxVIP

Investment DecisionRules 1 Four Basic Steps in Capital Budgeting Conceive ideas for capital investments. Estimate future expected cash flows. Evaluate project based on evaluation method and make the acceptance/rejection decision. Post-audit and review of accepted projects. 2 Net Present Value (NPV) The difference between the market value of a project and its cost: NPV=PV(cash inflows) – PV(cash outflows) 3 Calculating NPVs with a Spreadsheet Spreadsheets are an excellent way to compute NPVs, especially when you have to compute the cash flows as well. Using the NPV function The first compone