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Investment Apprasial (Compounding and Discounting (see separate mind map),…
Investment Apprasial
Compounding and Discounting
see separate mind map
Objective, inputs and processes
Decision inputs
Cash flow/Time Value of Money
Decision Analysis
Discounted cash flow project appraisal techniques
Yes or No
The investment decision: Alternative uses of firm's funds
Firms with project funds
Alternatively hand the money back to shareholders
Shareholders invest for themselves
Investment opportunity in financial assets e.g. Shares or bonds
Invest within the firm
Investment opportunity in real assets - tangible or intangible
Net Present Value
Payback
Return on Capital Employed
Internal Rate of Return
Capital Rationing, Tax and Capital Allowances
Inflation and probability
Sensitivity Analysis