This is an in-depth capital budgeting problem. The initial cash outlay at Time 0 is the cost of the new
equipment, $40,500,000. The sales each year are a combination of the sales of the new smart
phone, the lost s
Incremental Cash Flows is the difference between a firms future cash flows with a project and those
without the project.
Consists of any and all changes in the firms future cash flows that are direct
consequences of the takin
Principles of Finance
An investment is worth undertaking if it creates value for its owners.
Create value by identifying an investment worth more than it costs to acquire
Net Present Value (NPV) is the difference between an investments market
Investment case study
New Variable Cost
Variable cost of lost Sales
Net Variable Cost
Net Working Capital cash flow
Net Cash Flow
Alpha is used in finance to represent two things: 1. A measure of performance on a risk-adjusted basis. .
The excess returns of a fund relative to the return of a benchmark index is the fund's alpha. Alpha is
most often used for mutual funds and other sim
An investment has a positive NPV if its market value exceeds its cost.
This type of investment is desirable because it creates value for its owner.
The problem is identifying such opportunities.
Prime rate - The basic interest rate on short-term loans that the largest
commercial banks charge to their most creditworthy corporate customers.
Discount rate - The interest rate that the Fed offers to commercial banks for
overnight reserve loans.