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Unformatted text preview: Depreciation-not a real loss an on-paper loss Problem set-earnings – depreciation = appropriate calc. for taxes- Earnings after taxes + depreciation = cash flow Payback method-what ery1 wants but not that great-if I spent 10k today I should get it back in cashflows IRR-calculate interest rate with cashflows and inflows Yield on an investment use present value of $-PVannuity = A x PVifa-PVa/A = PVifa 1000/244 = 4.1-4.1 for 5 years = 7% (table D) If cashflows = uneven-average them Net Present Value (NPV)-present value of inflows minus present value of outflows-include discounts-take the sum and multiply it by the present value on chart = w/discount Mutually exclusive options-take the highest one Multiple options-exclude anything that doesn’t meet your desire Risk-IRR & PB method risk is assumed =-NPV: accounts for risk by increasing discount rate-negative result = not worth it...
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- Fall '09
- Finance, CASHFLOWS, Bonds -Real rate