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Investment appraisal techniques, CF0 = initial cash outflow on project …

- - - - Step 1 - use appropriate discount rate to discount the project's future cash flows
        
        The sum of these discounted cash flows are the present value (PV)
      - Step 2 - calculate the NPV bu subtracting the cost of initial investment from the PV
      - Step 3 - make a decision ( accept or reject the project)
      - If NVP = positive - accept If NVP = negative - reject
  - - - IRR = r1 NPV1/ NPV1 - NPV2 (r2 - r1)
  - - - easy to calculate, simple to understand
      - useful in certain situations
      - favours projects with a quicker return
    - - does not account for TVM of money
      - ignores return after payback period
      - objective measure of what time should be set as minimum payback period