April%2014%20Town%20Meeting%20with%20ink

April%2014%20Town%20Meeting%20with%20ink - Chapter11...

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Chapter 11 Capital Budgeting Decision Making  Techniques
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Reminders & Announcements Chapter 11 Learning Goals Payback vs. Discounted Payback NPV IRR NPV Profiles and Ranking Conflicts MIRR
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Chapter 11 Compass Post-quiz due by 11:59  PM Friday Apr. 16. Chapter 12 Compass Pre-Flight is due by  11:59 PM Monday Apr. 19.  Capital Budgeting Excel Project is available  (Group Corner folder) and is due by 10 PM  Sunday, Apr. 25.  The hand-in mechanism will  be set up next week.
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From Chapter 11, students should be able to do  the following. Understand and use the capital budgeting  decision techniques: Payback, Discounted  Payback, NPV, IRR, & MIRR.  Understand the advantages and  disadvantages of each technique.  Reconcile ranking conflict between NPV and  IRR for mutually exclusive projects. Understand the cause of ranking conflicts and  calculate the range of discount rates for this  conflict (crossover rate).
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A problem with Discounted Payback Period is  it can ignore which of the following? A. The time value of money B. The cash flows beyond this payback period. C. The cost of the project. D. Both A and B.
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Payback = time to recover project’s initial cost Ignores time value of money! Ignores cash flows beyond payback period. The Discounted Payback Period addresses  the first problem. Disc. PB tells how long it takes to recover  capital and financing costs for a project.
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