Chapter 14 Money, Interest Rates,
and Exchange Rates
e Equilibrium Interest Rate)
(The Money Supply and The Exchange Rate In The Shout Run)
ney, The Price Lever, and The Exchange Rate In The Long Run )
(Inflation And Exchan
What is capital budgeting?
The process used to assess if (tangible and intangible) investments
of a firm are good value.
What does international capital budgeting imply?
1. That investments can be made in for
Flexible Budgets, Variances, an
d Management Control: II
Overhead costs are a major cost area for man
Planning and control of overhead costs is an o
ngoing challenge to managers.
This chapter emphasizes the ov
Chapter 3 Capital
Chapter 4 Capital
Chap8 Capital Budgeting
Importance of Capital Budgeting
Capital Budgeting Decision Criteria
Practical Issues of Making Capital Budgeting
The capital budgeting process.
Calculation of payback, NPV, IRR, and
MIRR for proposed projects.
Measurement of risk in capital
budgeting and how to deal with it.
6 Net present value and
internal rate of
NPV and project interdependence
ROCE is an acronym standing for the return
on capital employed.
Average rate of return (ARR)
Internal rate of return (IRR).
Physical investment line (PIL)
Interest rates and
identify influences on interest rates
consider the aims and techniques of
compare alternative policy targets
explain how changes in short term
interest rates are passed through
Net Present Value
We spent the time developing our basic
approach to DCF analysis.
The importance of a financial market to the
economy and why investors receive interest
(compensation) for saving/lending.
The usefulness of the
Interest Rates, Present and
Future Value Mathematics
Understanding the difference
between debt and equity rates of
Understanding the role of PV and FV
math in calculating debt and equity
rates of return
Calculating PVs and FVs
Basic Capital-Budgeting Techniques
Time until the initial
cash outlay has been
The number of years
required to recover the
initial investment out
Capital Budgeting Techniques
Calculate the payback period, net present value (NPV), and internal rate of return
(IRR) of different projects; make investment decision based on the calculations.
Use net present value profiles to select mutuall