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Unformatted text preview: Operating budget-short run= operating year to year Difference between independent and mutually exclusive projects-Independent: 2 projects dont get in the way of each other-Mutually exclusive: choose one or the other, cant do both Difference between normal and non-normal cash flow streams-Normal: negative cash flow, then positive (1 change in cash flows)-Non-normal: multiple changes (spend, get, spend, get, spend) Capital budget valuation methodologies slide Know how to do the examples with Cash flow projects S and L-IRR on a bond= yield to maturity-I under NPV= WACC (K) Advantages and disadvantages of Payback 8-13-Short sighted NPV-Also called price of project-When NPV=0 then K=IRR Rationale for the NPV method-Example: Disney o Multiple ops that need to do multiple things o Accepted if project NPV>0 o Need to make decisions NPV= best because puts true PV as actual flows of money...
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