Chapter 14 Money, Interest Rates,
and Exchange Rates
14 1
(Th
e Equilibrium Interest Rate)
14 2
(The Money Supply and The Exchange Rate In The Shout Run)
14 3
(Mo
ney, The Price Lever, and The Exchange Rate In The Long Run )
14 4
(Inflation And Exchan
International
Capital Budgeting
1
Introduction
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
Chapter 8
8-1
Introduction
Overhead costs are a major cost area for man
y organizations.
Planning and control of overhead costs is an o
ngoing challenge to managers.
This chapter emphasizes the ov
Chapter 3 Capital
Budgeting (I)
Chapter 4 Capital
Budgeting (II)
16116
Chap8 Capital Budgeting
1
Agenda
Chapter 3
Importance of Capital Budgeting
Capital Budgeting Decision Criteria
Chapter 4
Practical Issues of Making Capital Budgeting
16116
Chap8 Capita
Capital Budgeting
Decision Methods
1
Learning Objectives
The capital budgeting process.
Calculation of payback, NPV, IRR, and
MIRR for proposed projects.
Capital rationing.
Measurement of risk in capital
budgeting and how to deal with it.
2
The Capita
6 Net present value and
internal rate of
return developed
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)
Time
Week Nine
Interest rates and
monetary policy
1
Objectives
identify influences on interest rates
consider the aims and techniques of
monetary policy
compare alternative policy targets
explain how changes in short term
interest rates are passed through
Net Present Value
Last Time
We spent the time developing our basic
approach to DCF analysis.
We discussed:
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
Lecture Map:
Understanding the difference
between debt and equity rates of
return
Understanding the role of PV and FV
math in calculating debt and equity
rates of return
Calculating PVs and FVs
Interest
MGMT212 1
Capital Budgeting
Basic Capital-Budgeting Techniques
Investment
Criterion
Payback Period
Definition
Time until the initial
cash outlay has been
recovered.
The number of years
required to recover the
Discounted
initial investment out
Payback
of p
Capital Budgeting Techniques
Requirements:
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