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Unformatted text preview: Chapter 11 Capital Budgeting Decision Making Techniques Reminders & Announcements  Chapter 11 Learning Goals  Payback vs. Discounted Payback  NPV  IRR  NPV Profiles and Ranking Conflicts  MIRR Chapter 11 Compass Postquiz due by 11:59 PM Friday Apr. 16.  Chapter 12 Compass PreFlight 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 handin mechanism will be set up next week. 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). 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. 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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This note was uploaded on 09/25/2010 for the course FIN 221 taught by Professor Dyer during the Spring '08 term at University of Illinois at Urbana–Champaign.
 Spring '08
 dyer
 Finance

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