公司理财教材新chap7.pptVIP

* * Similar advantages and disadvantages as standard payback method, with the exception that cash flows prior to the cutoff are not discounted at zero. * * * * * * * * The preferred project in this case depends on the discount rate, not the IRR. * The cross-over rate is the IRR of project A-B * * * * * * * Cash flows prior to the cutoff are implicitly discounted at a rate of zero, and cash flows after the cutoff are discounted using an infinite discount rate. Disadvantages: Ignores the time value of money Uses an arbitrary benchmark cutoff rate Based on book values, not cash flows and market