Chapter 11

Chapter 11 - Chapter11:ProfitabilityIndex&IRR POW# IRR...

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* IRR * Chapter 12: Part 1 Discussion * Includes  all cash flows  that occur  during the  life  of the project. 2) Considers the  time value of money 3) Incorporates the  required rate of   return  (i.e. risk) of the project.  [ Remember INVERSE  relationship!] There are  Four Methods  discussed in Chapter 11.  An  analyst needs to carefully weigh the strengths and  weaknesses of each method before making a long-term  capital budgeting decision. * Payback Period * Net Present Value (NPV) * Profitability Index (PI) * Internal Rate of Return (IRR) -350,000   CFj  (Time 0) [Flash 0; CF] 75,000  CFj  (Time 1-6)  [Flash 1; CF]
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6                          Shift  Nj  [Flash 1; N] 88,500  CFj  (Time 7-9)  [Flash 2; CF] 3                        Shift  Nj  [Flash 2; N] 125,000 
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Chapter 11 - Chapter11:ProfitabilityIndex&IRR POW# IRR...

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