2-13 Notes BF - Business Finance Notes Project Evaluation Criteria o Net Present Value(NPV o Internal Rate of Return(IRR o Profitability Index o Payback

2-13 Notes BF - Business Finance Notes Project Evaluation...

This preview shows page 1 - 2 out of 2 pages.

2/13/08 Business Finance Notes Project Evaluation Criteria o Net Present Value (NPV) o Internal Rate of Return (IRR) o Profitability Index o Payback Period o Discounted Payback Period o Average Accounting Return Net Present Value o Total of all present values – Initial Investment Payback Period o How long does it take to get the initial cost back in a nominal sense? o Computation Estimate the Cash flows Subtract the future cash flows from the initial cost until the initial investment has been recovered o Decision Rule Accept if the payback period is less than some preset limit Discounted Payback Period o Compute the present value of each cash flow and then determine how long it takes to pay back on a discounted basis o Compare to a specified required period o Decision Rule Accept the project if it pays back within a set allotment of time

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture