4 define construct and interpret a graph called an npv

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Unformatted text preview: major DCF methods. 4. Define, construct, and interpret a graph called an “NPV profile.” 5. Understand why ranking project proposals on the basis of IRR, NPV, and why ranking project proposals on the basis of IRR NPV and PI methods “may” lead to conflicts in rankings. 6. Describe the situations where ranking projects may be necessary and justify when to use either IRR, NPV, or PI rankings. 7. Understand how “sensitivity analysis” allows us to challenge the singlepoint input estimates used in traditional capital budgeting analysis. 8. 34 Understand the payback period (PBP) method of project evaluation and selection, including its: (a) calculation; (b) acceptance criterion; (c) advantages and disadvantages; and (d) focus on liquidity rather than profitability. Explain the role and process of project monitoring, including “progress reviews” and “post-completion audits.” Certified Certified Financial Controller CFC 17 Capital Budgeting Techniques • Project Evaluation and Selection Evaluation and Selection • Potential Difficulties • Capital Rationing • Project Monitoring Monitoring • Post-Completion Audit 35 Certified Financial Controller CFC Project Evaluation: Alternative Methods • Payback Period (PBP) Period (PBP) • Internal Rate of Return (IRR) • Net Present Value (NPV) • Profitability Index (PI) Index (PI) 36 Certified Financial Controller CFC 18 Proposed Project Data Julie Miller is evaluating new project Julie Miller is eva...
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