Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
8 Cards in this Set
- Front
- Back
|
What are real investments? |
Projects involving tangible or intangible assets. |
|
|
What are two good methods to evaluate investments? |
NPV is the best, IRR and MIRR are second best. |
|
|
What is NPV? |
PV of all cash flows including investments and profits. |
|
|
How to calculate NPV? |
1. Plot cash flows in timeline. 2. Discount (PV) of cost of capital. 3. Sum discounted values. |
|
|
NPV Formula |
|
|
|
What is IRR? |
It is the interest rate that makes the project NPV equal to zero. To calculate it is to guess and check. |
|
|
What is MIRR? |
It rearranges the cash flows so there is only one change of sign over the projects life . |
|
|
What is the formula for profitability index? |
PI=NPV/resource consumed |
