Project management topic on Capital budgeting techniques - NPV - Net Present Value, IRR - Internal Rate of Return, Payback Period, Profitability Index or Benefit Cost Ratio.
Views: 484464 pmtycoon
Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy.. No wonder others goin crazy sharing this??? Share it with your other friends too! http://www.youtube.com/watch?v=QRh0tiG2lVk Fun MBAbullshit.com is filled with easy quick video tutorial reviews on topics for MBA, BBA, and business college students on lots of topics from Finance or Financial Management, Quantitative Analysis, Managerial Economics, Strategic Management, Accounting, and many others. Cut through the bullshit to understand MBA!(Coming soon!)
Views: 264466 MBAbullshitDotCom
#financial_management #FM #financialmanagement #YouTubeTaughtMe Capital Budgeting This video includes the following: 1. Meaning / Concept of capital budgeting : Capital budgeting is finance terminology for the process of deciding whether or not to undertake an investment project. Capital budgeting is a project selection exercise performed by the business enterprise. 2. Various capital budgeting decisions : i. Replacement decisions. ii. Expansion decisions. iii. Production of new goods or rendering new services. iv. Penetrating into new geographical area. 3. Need / Importance of Capital Budgeting : i. Indirect forecast of sales ii. Comparative study of alternative projects iii. Cash forecast iv. Shareholder’s wealth maximization Referred books for Financial Management : 1. https://amzn.to/2EixnpN ( Financial Management: Theory and Practice by Prasanna Chandra ) 2. https://amzn.to/2GB3Vxr ( Elements of Financial Management by S.N Maheshwari ) ****BEST BOOK FOR FM**** TAGS FOR THE VIDEO : capital budgeting decisions capital budgeting pdf capital budgeting importance capital budgeting definition capital budgeting ppt capital budgeting notes capital budgeting formula capital budgeting phases capital budgeting questions capital budgeting capital budgeting process capital budgeting meaning capital budgeting appraisal methods capital budgeting articles capital budgeting and its process capital budgeting advantages capital budgeting appraisal methods pdf capital budgeting and investment decisions capital budgeting and its methods capital budgeting and capital structure capital budgeting and financing decisions a capital budgeting decision a capital budgeting technique a. capital budgeting a capital budgeting analysis the capital budgeting process involves the capital budgeting process the capital budgeting director of sparrow corporation the capital budgeting decisions of small businesses the capital budgeting method that recognizes the capital budgeting decision pdf capital budgeting book pdf capital budgeting basics capital budgeting books capital budgeting basics pdf capital budgeting benefits capital budgeting balance sheet capital budgeting by dilip badlani capital budgeting books free download capital budgeting best practices capital budgeting by roque appendix b capital budgeting group presentation capital budgeting cash flow capital budgeting case study capital budgeting concept capital budgeting cash flow estimation capital budgeting chapter capital budgeting conclusion capital budgeting ca final capital budgeting ca ipcc capital budgeting ca final sums capital budgeting cfa level 1 capital budgeting decisions pdf capital budgeting decisions meaning capital budgeting decisions are reversible in nature capital budgeting diagram capital budgeting define capital budgeting decisions ppt capital budgeting decisions are based on capital budgeting define in hindi r&d capital budgeting capital budgeting examples capital budgeting exam questions capital budgeting exercises capital budgeting excel capital budgeting exercises and answers capital budgeting economics
Views: 66407 Sonu Singh - PPT wale
#CapitalBudgeting #FinancialManagement Described the terms Initial Investment, Subsequent Cash Flows and Terminal Cash Flow followed by a practical question. Student can also watch the following lectures related with the Financial Management : 1. Capital Budgeting Techniques || PB, ARR, NPV, PI & IRR https://www.youtube.com/watch?v=QXoFB4-MV_I 2. Present Value of Perpetuity : https://www.youtube.com/watch?v=gVxvJ_JTiug 3. Time Value of Money (Introduction) - Financial Management : https://www.youtube.com/watch?v=oeox8DLagHU 4. Leverage Analysis (Introduction) Financial Management : https://www.youtube.com/watch?v=3l1iB_-xZBw 5. Cash Budget (Introduction) : https://www.youtube.com/watch?v=s1Yx5bFOZfo Connect on Facebook : https://www.facebook.com/ca.naresh.aggarwal Download Notes: https://drive.google.com/drive/folders/0BzfDYffb228JNW9WdVJyQlQ2eHc?usp=sharing #FinancialManagement #CapitalBudgeting
Views: 191164 CA. Naresh Aggarwal
Compares the cost of two equipment options using the concept of present worth. Made by faculty at the University of Colorado Boulder Department of Chemical and Biological Engineering. Check out our Process Design playlist at http://www.youtube.com/playlist?list=PL4xAk5aclnUjEuE_fvbyEts_oBpHYcwLY
Views: 44894 LearnChemE
Payback Period Method or Benefit Cost Ratio is explained in Hindi. Payback Method and Discounted Payback Period are capital budgeting techniques to evaluate projects, just like NPV and IRR. Related Videos: Time Value of Money: https://youtu.be/Pazp1b2LhAQ Net Present Value - https://youtu.be/SpHIBfPGwx8 Internal Rate of Return - https://youtu.be/x6eXfx2Tv-w Profitability Index - https://youtu.be/7CCKn_eixZ0 इस वीडियो में पेबैक पीरियड मेथड या बेनिफिट कॉस्ट रेश्यो के बारे में समझाया गया है। IRR और NPV की ही तरह, पेबैक पीरियड मेथड और डिस्काउंटेड पेबैक पीरियड प्रोजेक्ट्स का मुल्यांकन करने के कैपिटल बजटिंग टेक्निक्स हैं। Share this Video: https://youtu.be/8MnGVL_3QuI Subscribe To Our Channel and Get More Property and Real Estate Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g If you want to become an Expert Real Estate investor, please visit our website https://assetyogi.com now and Subscribe to our newsletter. In this video, we have explained: What is payback period? Why should you calculate payback period for investments? What is the concept of payback period method? How to calculate payback period for any investment? How payback period method is different from other capital budgeting techniques? How to calculate cost benefit ratio for any investment? Which is the best method for evaluating any business, project or investment? What is the formula for calculating the payback period? How to calculate payback period in Microsoft excel sheet? How to quickly calculate payback period for investments? What is payback period calculation formula for Microsoft excel sheet of google spreadsheet? How to calculate discounted payback period? Make sure to Like and Share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Facebook – https://www.facebook.com/assetyogi Google Plus – https://plus.google.com/+assetyogi-ay Linkedin - http://www.linkedin.com/company/asset-yogi Instagram - http://instagram.com/assetyogi Twitter - http://twitter.com/assetyogi Pinterest - http://pinterest.com/assetyogi/ Hope you liked this video in Hindi on “Payback Period Method”.
Views: 42756 Asset Yogi
Project finance is the financing of long-term infrastructure, industrial projects, and public services, based on a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Corporate finance deals with the capital structure of a corporation including its funding and the actions management take to increase the value of the company. Click here to learn more about project finance: https://corporatefinanceinstitute.com/resources/knowledge/finance/project-finance-primer/ Click here to learn more about corporate finance: https://corporatefinanceinstitute.com/resources/knowledge/finance/corporate-finance-industry/
Views: 12842 Corporate Finance Institute
Chapter 5 Video Lecture Managerial Economics: A Problem Solving Approach by Luke Froeb, Brian McCann Summary of Main Points Chapter 5 -- Investments imply willingness to trade dollars in the present for dollars in the future. Wealth-creating transactions occur when individuals with low discount rates lend to those with high discount rates. -- Companies, like individuals, have different discount rates, determined by their cost of capital. They invest only in projects that earn a return higher than the cost of capital. -- The NPV rule states that if the present value of the net cash flows of a project is larger than zero, the project earns economic profit (i.e., the investment earns more than the cost of capital). -- Although NPV is the correct way to analyze investments, not all companies use it. Instead, they use break-even analysis because it is easier and more intuitive. -- Break-even quantity is equal to fixed cost divided by the contribution margin. If you expect to sell more than the break-even quantity, then your investment will be profitable.
Views: 11831 LukeFroeb
"Try my "Hands-on Python for Finance" course on Udemy free for the first 100 people with code: HPFF0975 https://www.udemy.com/hands-on-python-for-finance/ " http://alphabench.com/data/excel-npv-irr-tutorial.html Tutorial demonstrating how to calculate NPV, IRR, and ROI for an investment. Demonstrates manual calculation of present values as well as the use of NPV and IRR functions in Excel. The spreadsheet used can be downloaded at: http://alphabench.com/data/NPV-IRR_STR.xlsx Capital Budgeting includes the analysis of various projects with financial measurements such as Net Present Value (NPV), Internal Rate of Return (IRR) and Return on Investment (ROI). This video discusses all of these concepts briefly while demonstrating the calculation of them using Excel. Excel Functions: NPV IRR
Views: 63447 Matt Macarty
Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy.. No wonder others goin crazy sharing this??? Share it with your other friends too! Fun MBAbullshit.com is filled with easy quick video tutorial reviews on topics for MBA, BBA, and business college students on lots of topics from Finance or Financial Management, Quantitative Analysis, Managerial Economics, Strategic Management, Accounting, and many others. Cut through the bullshit to understand MBA!(Coming soon!) http://www.youtube.com/watch?v=a5yWr1hr6QY
Views: 566373 MBAbullshitDotCom
Explained various capital budgeting techniques with the help of one single question which are : 1. Pay Back Method 2. Average Rate of Return Method 3. Net Present Value Method 4. Profitability Index Method 5. Internal Rate of Return Method Student can also watch the following lectures related with the Financial Management : 1. Capital Budgeting (Introduction) - Financial Management : https://www.youtube.com/watch?v=ZOaGNDmKpzo 2. How to calculate PVF, PVAF, CVF, CVAF values on calculator : https://www.youtube.com/watch?v=cUTDq6hpais 3. Present Value of Perpetuity : https://www.youtube.com/watch?v=gVxvJ_JTiug 4. Time Value of Money (Introduction) - Financial Management : https://www.youtube.com/watch?v=oeox8DLagHU 5. Cost of Capital (Cost of Debt, Preference Shares, Equity and Retained Earnings) - Financial Management : https://www.youtube.com/watch?v=VGN_IonxroE 6. Cash Budget (Introduction) : https://www.youtube.com/watch?v=s1Yx5bFOZfo 🔴 Connect on Facebook : https://www.facebook.com/ca.naresh.aggarwal 🔴 Download Assignments: https://drive.google.com/drive/folders/0BzfDYffb228JNW9WdVJyQlQ2eHc?usp=sharing 🔴 Connect with Google+: https://plus.google.com/u/0/+CANareshAggarwal #CapitalBudgeting #FinancialManagement
Views: 429698 CA. Naresh Aggarwal
This brief video explains *the components of the decision tree *how to construct a decision tree *how to solve (fold back) a decision tree. Other videos: Decision Analysis 1: Maximax, Maximin, Minimax Regret https://youtu.be/NQ-mYn9fPag Decision Analysis 1.1 (Costs): Maximax, Maximin, Minimax Regret https://youtu.be/ajkXzvVegBk Decision Analysis 2.1: Equally Likely (Laplace) and Realism (Hurwicz) https://www.youtube.com/watch?v=zlblUq9Dd14 Decision Analysis 2: EMV & EVPI - Expected Value & Perfect Information https://www.youtube.com/watch?v=tbv9E9D2BRQ Decision Analysis 4: EVSI - Expected Value of Sample Information https://www.youtube.com/watch?v=FUY07dvaUuE Decision Analysis 5: Posterior Probability Calculations https://youtu.be/FpKiHpYnY_I
Views: 220388 Joshua Emmanuel
Shows the use of NPV and the equivalent annuity cash flow concept (EAC) to compare projects with different life spans
Views: 16929 Codible
This video explains the concept of Net Present Value and illustrates how to calculate the Net Present Value of a project via an example. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 573320 Edspira
For the first time in INDIA, textbook in Economics, Accountancy & Business Studies with FREE Video Lectures by Eminent Authors/Subject Expert. To buy books visit www.goyal-books.com To view FREE Video Lectures visit www.goyalsOnline.com/commerce About the Book » Written strictly according to the latest syllabus prescribed by the CB.S.E., New Delhi. » Up-to-date study material provided by using the latest available data. » Elaborate explanation of the concepts. » Summary (Points to Remember) given at the end of each Chapter. » Numerical Problems from previous years' question papers incorporated and solved in the respective Chapters. » Methodology of solving typical numerical problems given wherever necessary. » Methodology of drawing typical diagrams given wherever necessary. » Comprehensive Exercises given at the end of each Chapter. » Sample Question Paper given at the end of the book. » Multi-disciplinay Problems given at the end of the books. » Video lectures on each topic with replies to queries for better and clear understanding of the concepts by the Author/Subject Matter Expert. Benefits of Video Lectures » Easy to access anytime: With video lectures, students can learn anywhere from their mobile devices: desktops, laptops, tablets or smartphones. » Students learn when they are primed to learn. » Students can pause, rewind and replay the lecture. » Eases the distraction of having to transcribe the lectures. » Self-paced learning: Students can follow along with the lecture at their own pace, going more slowly or quickly » Bookmarking: Students can bookmark the point where they're up to in the video so they can easily return and continue watching the lecture at a later point. » Searchability: Students can easily search through the lecture to find the required sub-topic they need, without having to rewind and fast forward throughout the video. » Greater accuracy: Students will understand the lecture better and can make sure that they have not misheard anything. » Facilitates thinking and problem solving: It improves research skills, collaborative working, problem solving, technology and organisational skills.
Views: 26302 Goyal Bros. Prakashan - Video Lectures
IRR or Internal Rate of return concept and calculation in excel explained in Hindi. IRR and NPV are capital budgeting metrics to estimate the profitability of a project, business or investment. Internal rate of return should be more than the discount rate to make an investment profitable. Related Videos: Net Present Value (NPV) - https://youtu.be/SpHIBfPGwx8 NPV vs IRR - https://youtu.be/kUV9xE2B7KU Time Value of Money - https://youtu.be/Pazp1b2LhAQ आईआरआर या इंटरनल रेट ऑफ़ रिटर्न का कांसेप्ट और एक्सेल में कैसे कैलकुलेशन किया जाता है इस वीडियो में समझाया गया है। आईआरआर और एनपीवी किसी प्रोजेक्ट, बिज़नेस या इन्वेस्टमेंट की प्रोफिटिबिलिटी का अनुमान लगाने के लिए एक कैपिटल बजटिंग मैट्रिक्स है। निवेश लाभदायक बनाने के लिए इंटरनल रेट ऑफ़ रिटर्न डिसस्कॉउंट रेट से ज़्यादा होनी चाहिए। Share this Video: https://youtu.be/x6eXfx2Tv-w Subscribe To Our Channel and Get More Property and Real Estate Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g If you want to become an Expert Real Estate investor, please visit our website https://assetyogi.com now and Subscribe to our newsletter. In this video, we have explained: What is Internal Rate of Return or IRR? What is the definition of IRR? How to calculate internal rate of return or IRR? What is the concept of internal rate of return? How to evaluate investment returns using IRR? How to use internal rate of return to calculate net returns on an investment? How to do IRR calculation in excel sheet or Google spreadsheet? What is the formula for internal rate of return calculation? What is the IRR calculation formula? Which capital budgeting metrics are used to estimate the profitability of a project, business or investment? How to do investment analysis? What is the excel calculation formula for IRR calculation? How to calculate IRR for a long-term project, business or investment? How to make excel IRR calculator? How to know if your investment is profitable? Make sure to Like and Share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Facebook – https://www.facebook.com/assetyogi Pinterest - http://pinterest.com/assetyogi/ Instagram - http://instagram.com/assetyogi Linkedin - http://www.linkedin.com/company/asset-yogi Twitter - http://twitter.com/assetyogi Google Plus – https://plus.google.com/+assetyogi-ay Hope you liked this video in Hindi on “Internal Rate of Return (IRR) - Calculation & Concept”.
Views: 87822 Asset Yogi
CapEx versus OpEx. Capital Expenditures versus Operating Expenditures. There is a finance and accounting aspect to the terms CapEx and Opex, as well as a business model aspect. Let’s discuss both, and walk through some examples of how the terms CapEx and OpEx are used. CapEx is Capital Expenditures. OpEx is Operating Expenditures. What these terms have in common is the word expenditures, you are spending money, but in different ways. Capital Expenditures. As a working definition of CapEx, this is money spent by a business or organization to acquire or upgrade fixed assets, such as buildings, machines and equipment. Operating Expenditures. If CapEx is the upfront investment to buy a fixed asset, then a working definition of OpEx is the ongoing spending to keep the fixed asset running. For an expenditure to be considered as CapEx, you have to own an asset. There is a threshold level for expenditures to qualify as CapEx: there must be a useful life of more than one year, and the asset value must be more than a minimum amount. I have worked with a company where this minimum was $2500, and others where it was $7000. Please check with the finance department of your company on what your minimum level is. How about that part of maintenance where you are improving the performance of a machine and increase its capacity? What about software developed for internal use? What about the development phase of R&D? You could argue in all three cases that future economic benefits are generated by these projects, and according to the matching principle in finance it would be appropriate to capitalize these costs, and subsequently depreciate or amortize these assets over their useful life. Each of these cases will have to be evaluated carefully against current US GAAP or IFRS rules (depending on where your company is listed), and you will have to meet very strict criteria to apply a CapEx treatment. How does CapEx affect the financial statements? Let’s take a look at the balance sheet, the income statement and the cash flow statement, when we answer the question “does this expenditure qualify for CapEx (it meets the capitalization criteria) or it does not qualify as CapEx?”. First of all, the CapEx spend is a cash outflow recorded in “Cash From Investing Activities”. On the balance sheet, it gets accounted for as an asset, in the Plant and Equipment category. Over the years of its useful life, the asset gets depreciated, and the depreciation charge hits the income statement or P&L in each of the years of the assets’ economic life. I will link to my video about deprecation if you are interested in learning how that works: https://www.youtube.com/watch?v=6SY8s1_OEro Do you go for the upfront CapEx investment to own servers for your datacenter, where you are unsure how much capacity you will actually need, or do you pay a monthly OpEx fee for an external cloud service where it’s pretty much “pay as you go” and “spend what you use”? I can’t give you a “one size fits all” answer to this question, it’s really something that an IT manager and a finance manager should analyze together. Risk and scale should be part of this conversation. The evaluation is a variation of the age-old “own versus use”, “buy versus rent”, “buy versus lease” discussion, which is more relevant than ever before in these days of ubiquitous digital devices and tools, disruption of mobility models through Uber and others, and disruption of the travel and leisure models through Airbnb. This video discusses the impact of CapEx versus OpEx on the balance sheet, income statement, and cash flow statement, as well as ratios such as ROA. For more information on ROA and DuPont analysis, watch https://www.youtube.com/watch?v=bhbDDSohJ84 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Views: 55720 The Finance Storyteller
This video is about DECISION TREE ANALYSIS which will help you to understand the basic concept of decision tree analysis. In this video i have solved one practical question which will help you to get the process of solving any numerical question and example. After watching you will also get to know that how to construct the decision tree. I hope this will help you. Thanks JOLLY Coaching how to solve decision tree problem, Decision tree analysis, How to solve decision tree analysis, Practical solved questios on decision tree analysis. decision threoy decision tree analysis
Views: 140652 JOLLY Coaching
Net Present Value or NPV concept & calculation method in Excel explained in Hindi. NPV is an important valuation metric to evaluate a project, business, franchise or an investment opportunity. It is also used in Discounted Cash Flow method to value a company. It is used along with IRR (Internal Rate of Return) to evaluate an investment. Net Present Value is based on the concept of Time Value of Money where we calculate the present value of future cash flows (future value). Related Videos: Internal Rate of Return (IRR) - https://youtu.be/x6eXfx2Tv-w Time Value of Money - https://youtu.be/Pazp1b2LhAQ Present Value - https://youtu.be/pxm-5MBO2dg Present Value of an Annuity - https://youtu.be/0giLqLyijtc एक्सेल में नेट प्रेजेंट वैल्यू या एनपीवी का कांसेप्ट और कैलकुलेशन मेथड इस वीडियो में हिंदी में समझिये। एनपीवी किसी प्रोजेक्ट, बुज़ीनेस, फ्रेंचाइज़ी या इन्वेस्टमेंट ओपोर्च्युनिटी की वैल्यूएशन करने के लिए एक महत्वपूर्ण वैल्यूएशन मीट्रिक है। इसे किसी कंपनी की वैल्यूएशन के लिए डिस्काउंटेड कैश फ्लो मेथड में भी उपयोग किया जाता है। किसी इन्वेस्टमेंट का वैल्यूएशन करने के लिए इसका उपयोग आईआरआर (Internal Rate of Return) के साथ किया जाता है। नेट प्रेजेंट वैल्यू टाइम वैल्यू ऑफ़ मनी के कांसेप्ट पर आधारित है जहां हम फ्यूचर कॅश फ्लो (फ्यूचर वैल्यू) के प्रेजेंट वैल्यू की गणना करते हैं। Share this Video: https://youtu.be/SpHIBfPGwx8 Subscribe To Our Channel and Get More Property and Real Estate Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g If you want to become an Expert Real Estate investor, please visit our website https://assetyogi.com now and Subscribe to our newsletter. In this video, we have explained: What is net present value? What is the purpose of net present value? Why net present value calculation is used? How to calculate net present value? What is the calculation formula for net present value? What is the method of NPV calculation? How to evaluate a project, business, franchise or an investment opportunity with net present value method? What is discounted cash flow method? What is DCF and IRR (Internal Rate of Return) and how they are used? What is terminal cash flow? How net present value is calculated for a project, business or franchise? How net present valuation method is used to evaluate an investment opportunity? What is discount rate? How to evaluate the value of a company? What is the valuation method for projects, business, company, franchise and investment opportunity? How to calculate net present value in a Microsoft Excel sheet or Google spreadsheet? How to evaluate the net present value of any investment? Make sure to Like and Share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Instagram - http://instagram.com/assetyogi Twitter - http://twitter.com/assetyogi Linkedin - http://www.linkedin.com/company/asset-yogi Facebook – https://www.facebook.com/assetyogi Pinterest - http://pinterest.com/assetyogi/ Google Plus – https://plus.google.com/+assetyogi-ay Hope you liked this video in Hindi on “Net Present Value (NPV)”.
Views: 81557 Asset Yogi
Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy.. No wonder others goin crazy sharing this??? Share it with your other friends too! Fun MBAbullshit.com is filled with easy quick video tutorial reviews on topics for MBA, BBA, and business college students on lots of topics from Finance or Financial Management, Quantitative Analysis, Managerial Economics, Strategic Management, Accounting, and many others. Cut through the bullshit to understand MBA!(Coming soon!)
Views: 358204 MBAbullshitDotCom
Premium Course: https://www.teachexcel.com/premium-courses/68/idiot-proof-forms-in-excel?src=youtube Excel Forum: https://www.teachexcel.com/talk/microsoft-office?src=yt Excel Tutorials: https://www.teachexcel.com/src=yt This tutorial shows you how to get the Net Present Value of a project or business venture in the future using excel. You can do this very easily in excel spreadsheets and this will teach you how to do that using the estimated cash flows of a project. The NPV() function is used for the calculations. This is also a basic discounted cash flows example. This includes discount rate and number of periods in order to use the npv function. To follow along with the spreadsheet used in the video and also to get free excel macros, tips, and more video tutorials, go to the site: http://www.TeachMsOffice.com
Views: 275693 TeachExcel
Profitability Index or Benefit Cost Ratio is explained in Hindi. It is a capital budgeting technique just like NPV, IRR and Payback Period that helps you in analysing any investment or business. Related Videos: NPV (Net Present Value): https://youtu.be/SpHIBfPGwx8 IRR (Internal Rate of Return): https://youtu.be/x6eXfx2Tv-w NPV vs IRR: https://youtu.be/kUV9xE2B7KU Payback Period Method: https://youtu.be/8MnGVL_3QuI Discount Rate - https://youtu.be/XqqD1d713W8 इस वीडियो में प्रोफिटेबिलिटी इंडेक्स या बेनिफिट कॉस्ट रेश्यो को हिंदी में समझाया गया है। Share this Video: https://youtu.be/7CCKn_eixZ0 Subscribe To Our Channel and Get More Property and Real Estate Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g If you want to become an Expert Real Estate investor, please visit our website https://assetyogi.com now and Subscribe to our newsletter. In this video, we have explained: What is profitability index? How to calculate benefit cost ratio? What is the best method for cost benefit analysis? How to calculate profit using profitability index method? How to use the profitability index formula for investments? How to calculate profits for investment in Microsoft Excel using the profitability index formula? What is the profitability index calculation formula for excel calculation? What are the best methods for profit calculation for any business, project or investment? What is the manual calculation formula of profitability index? How to evaluate cost benefit ratio for any investment? How to calculate the cost and return ratio for any investment plan? How to know which business, project or investment is best for you? Make sure to Like and Share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Twitter - http://twitter.com/assetyogi Pinterest - http://pinterest.com/assetyogi/ Linkedin - http://www.linkedin.com/company/asset-yogi Instagram - http://instagram.com/assetyogi Facebook – https://www.facebook.com/assetyogi Google Plus – https://plus.google.com/+assetyogi-ay Hope you liked this video in Hindi on “Profitability Index”.
Views: 13118 Asset Yogi
Net Present Value and Internal Rate of Return, in short NPV and IRR. What is the purpose of the NPV and IRR methods of investment analysis, and how do you calculate NPV and IRR? The main idea of Net Present Value is very simple: time is money! The net present value (or “discounted cash flow”) method takes the time value of money into account, by: - Translating all future cash flows into today’s money - Adding up today’s investment and the present values of all future cash flows If the net present value of a project is positive, then it is worth pursuing, as it creates value for the company. IRR is the discount rate at which the net present value becomes 0. In other words, you solve for IRR by setting NPV at 0. Related videos: How to calculate NPV in Excel https://www.youtube.com/watch?v=jQ_NDQ2qVVA How to calculate IRR in Excel https://www.youtube.com/watch?v=L0JCg5TXudc Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Views: 56970 The Finance Storyteller
Due to differences in the scale, timing, and riskiness of projects, we cannot simply compare the IRRs (incremental rates of return) of two projects. However, we can compute the incremental cash flows of choosing one project versus the other and compute an incremental IRR for these cash flows. This incremental IRR can then be compared to the discount rate to determine which project is more profitable. That being said, the incremental IRR is problematic when some of the negative cash flows do not precede the positive cash flows. Furthermore, the incremental IRR tells us which project is more profitable but it does not tell us whether each of the projects has a positive NPV on a stand-alone basis. And, if the projects have different costs of capital, then we have the additional problem of not knowing the cost of capital to which we should be comparing the incremental IRR. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 66482 Edspira
This video explains the concept of IRR (the internal rate of return) and illustrates how to calculate the IRR via an example. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 686892 Edspira
Net Present Value, Internal Rate of Return ACCA F2 Investment Appraisal (Capital Budgeting) Free lectures for the ACCA F2 Management Accounting / FIA FMA Exams
Views: 30275 OpenTuition
In this video I go over through some basics in economics and financing and discuss the Internal Rate of Return (IRR) as well as derive the formula for the Net Present Value (NPV). In financial budgeting and investment analysis, to compare different projects or investments the interest rate at which all current and future cash flows break even in terms of their present values is called the internal rate of return (IRR) and is simply an interest or discount rate. The Present Value (PV) is the value of any future cash flows but set to the date of valuation. The value of money increases with time so $1 today is worth more than $1 tomorrow due to the ability to gain value through interest. The NPV is simply the sum of all the PVs and when equal to 0, the corresponding interest rate is the IRR. In this video I go over an example in which I derive the NPV formula and solve for the IRR using an Microsoft Excel spreadsheet to manipulate the IRR until the NPV = 0. This is a very useful introductory video to financing and investing so make sure to watch it! Download the notes in my video: PDF Notes: https://1drv.ms/b/s!As32ynv0LoaIhddf6KOQLiv9qVe6rA Excel Notes: https://1drv.ms/x/s!As32ynv0LoaIhddOstzID9RthXuu8Q Related Videos: Marginal Costs - Economics 101: http://youtu.be/XS-1L6Iq4Wk Marginal Cost vs Average Cost - Economics 101: http://youtu.be/HiMaLvsTstc Marginal Cost vs Average Cost Example - Economics 101: http://youtu.be/W2xx0Wtl608 Marginal Cost vs Marginal Revenue: When is maximum profit realized??: http://youtu.be/ufMgmYbZPdU Marginal Cost vs Marginal Revenue - Examples Part 1: Maximizing Profit: http://youtu.be/cQ83F5qynco Marginal Cost vs Marginal Revenue - Examples Part 2: Maximizing Revenue : http://youtu.be/nrH_Jrpm7vU . ------------------------------------------------------ SUBSCRIBE via EMAIL: https://mes.fm/subscribe DONATE! ʕ •ᴥ•ʔ https://mes.fm/donate Like, Subscribe, Favorite, and Comment Below! Follow us on: Official Website: https://MES.fm Steemit: https://steemit.com/@mes Gab: https://gab.ai/matheasysolutions Minds: https://minds.com/matheasysolutions Twitter: https://twitter.com/MathEasySolns Facebook: https://fb.com/MathEasySolutions LinkedIn: https://mes.fm/linkedin Pinterest: https://pinterest.com/MathEasySolns Instagram: https://instagram.com/MathEasySolutions Email me: [email protected] Try our Free Calculators: https://mes.fm/calculators BMI Calculator: https://bmicalculator.mes.fm Grade Calculator: https://gradecalculator.mes.fm Mortgage Calculator: https://mortgagecalculator.mes.fm Percentage Calculator: https://percentagecalculator.mes.fm Try our Free Online Tools: https://mes.fm/tools iPhone and Android Apps: https://mes.fm/mobile-apps
Views: 10368 Math Easy Solutions
Described the procedure and concept to calculate cost of Debt, Cost of Preference Shares, Cost of Equity and Cost of Retained Earnings. Student can also watch the following lectures related with the Financial Management : 1. Capital Budgeting (Introduction) - Financial Management : https://www.youtube.com/watch?v=ZOaGNDmKpzo 2. Present Value of Perpetuity : https://www.youtube.com/watch?v=gVxvJ_JTiug 3. Time Value of Money (Introduction) - Financial Management : https://www.youtube.com/watch?v=oeox8DLagHU 4. Leverage Analysis (Introduction) Financial Management : https://www.youtube.com/watch?v=3l1iB_-xZBw 5. Cash Budget (Introduction) : https://www.youtube.com/watch?v=s1Yx5bFOZfo 🔴 Connect on Facebook : https://www.facebook.com/ca.naresh.aggarwal 🔴 Download Assignments: https://drive.google.com/drive/folders/0BzfDYffb228JNW9WdVJyQlQ2eHc?usp=sharing 🔴 Connect with Google+: https://plus.google.com/u/0/+CANareshAggarwal #CostOfCapital #FinancialManagement
Views: 216524 CA. Naresh Aggarwal
For other Informa Webinars: http://www.informa-mea.com/webinars To download slides: hhttps://www.slideshare.net/IIRME/financial-budgeting-and-monitoring-for-projects The successful management of a project extends beyond project delivery – it includes applying sound principles to assessing project feasibility within the context of related risks to maximise your return on investment and ensure strategic alignment. Many appraisal methodologies are applied across industries to assess the feasibility of projects and support capital investment decisions. These assessments are based on both quantitative and qualitative aspects, with quantitative assessments including the use of NPV and IRR calculations. This webinar focuses on an approach to address conflicting results in NPV and IRR calculations where capital investments span differing periods. The webinar starts with an overview of differing techniques applied in capital investment decision making and provides the basis of the NPV and IRR calculation methodologies. This is followed by a practical example using an assessment technique that addresses conflicting results between NPV and IRR calculations. A Q&A session concludes the webinar. About the Presenter: Peter Hofmann is an Executive Director of MFX Options and Solutions (Pty) Ltd, specialising in business management and corporate strategic and operational management consulting. The platform for his current business focus was established through his exposure to the holistic corporate business environment where he built a successful career over two decades, having established and built up successful departments focused on operational and executive management and board liaison. His integral involvement with a range of international clients includes projects undertaken by MFX such as: - Strategic business plans, functional plans and processes, supply chain management, strategic planning and process analysis for implementation of ERP systems - The assessment of economic, social and environmental impacts and development of systems and processes to drive performance management and reporting and compliance within an organisational context
Views: 190 Informa Middle East
Watch full Hindi video to know everything about Cost of Capital in this lecture by accounts guru, Vishwanath Gaur. If you have any doubt, feel free to write it in comment section. Follow us on Facebook - https://www.facebook.com/finnocode/ Our Website - http://finnocode.com/
Views: 59002 Finnocode Accounts
There are important differences between real assets that are used to make everything we buy in our economy. We buy goods and services. Financial services and securities are another group of assets. These are not tangible. They have no physical form. CAPX is a measure of capital expenditure. The amount of capital expenditure in a quarter or a year represents the capital budget. This is the dollar value of the actual decision upper management makes to invest in tangible and intangible assets. A group of investment and financing decisions illustrate this. Investments include locomotives for trains and advertising for consumer goods. These investments are tangible and intangible uses of cash. A car factory is another tangible investment example. Examples of financing decisions include reinvestment of profits. Share buy-backs are another. An important consideration is what a corporation in essence is. This legal entity is owned by shareholders who seek bottom line results. Modigliani & Miller showed that the only way managers can increase firm value is to increase bottom line profits. They also showed that fiddling with the pay-out policy or capital structure should not affect firm value. A corporation can act like a person. It is a legal entity that is owned by its shareholders but it acts like a person that moves and thinks like its managers. This also means that a corporation can sue and even be sued in a court of law. But liability stops with the corporation. Shareholders have limited liability. And anybody can form a corporation. Here’s how you can form your own corporation. You first go out and raise capital from investors. You invest the cash in your firm. If the company is profitable money will be pumped out of operations. This cash-flow can be reinvested to expand operations. Or it can be returned to shareholders. Warren Buffett is very critical of the decisions executives make regarding cash. He is such a big investor that he acts as a financial manager mediating cash flow between the financial markets and the companies he funds. In the United States the goal of management is to maximize profits. In Germany managers take into account the needs of stakeholders. This is a much more expansive concept that includes workers, suppliers, and bankers. American CEOs typically become frustrated when dealing with a stakeholder management mentality. Even so profit maximization is ephemeral with regard to timing. Profits can be generated in ways that are damaging to the company. Buffett finds this fraudulent. Cutting dividends to free up cash is harmful if the firm earns less than the opportunity cost of capital. This alludes to a trade-off that exists between the hurdle rate cost of capital and the opportunity cost of capital. Investing in a project locks cash in place and obviates other opportunities. At the end of a successful quarter the CFO has to decide whether to reinvest in a positive NPV project or to pay a fat dividend to shareholders. The shareholders can then invest for themselves however they wish. A kink in the process is introduced if there are agency problems in management. These can arise from stupidity or sloppiness in the form of misfeasance. Executives can also be outright dishonest in the form of malfeasance. Empire building is a grey area where CEOs seek massive bonuses from mergers & acquisitions that do improve or destroy shareholder wealth. This can be exacerbated by differences in information where executives know more about dividends, financing, and outstanding issues. Managers want to maximize bonuses and pay while stockholders want to retain as much profit as possible. Conflict can occur between executive and operational management groups. Stockholders can end up at odds with bankers and other lenders. This conflict has existed since the Dutch East Indies. Modern mechanisms to clean up executives includes tighter scrutiny of the board of directors over the CEO; more independent board members; prohibiting the CEO to be chair of the board and stock options to align upper management incentives with shareholders. In some markets executives who shirk are thrown out by more competent ones. Dr. Scott Brown is a researcher in finance who is nationally recognized by the Certified Financial Analyst Institute (CFA). He is an associate professor of finance at the AACSB Accredited Graduate School of Business at the University of Puerto Rico and author of his bestselling Udemy course on Value Investing. Discover More in this Udemy Course on Value Investing Here: https://www.udemy.com/how-to-build-your-million-dollar-stock-portfolio-from-zero/ Also sign up for special offers at http://drscottbrown.com
Views: 30032 Scott Brown
1.Significance of capital budgeting 2.Capital budgeting methods 3.Process of capital budgeting 4.Capital budgeting examples 5.Objectives of capital budgeting 6.Capital budgeting definition 7.Nature of capital budgeting 8.Features of capital budgeting 9.What do you mean by capital budgeting 10.What is meant by capital budgeting techniques 11.steps in the capital budgeting process 12.example of capital budgeting CA IPCC/INTER Fianancial Management (FM) Lectures -by CMA .chander dureja 9717356614: This is only a demo video. Classes are available for CA/CMA/CS. My all classes are available in Pen drive /Download link mode. For any query, please visit www.cdclasses.com or msg on 9717356614.
Views: 139604 CMA. Chander Dureja
This video is about DECISION THEORY of OPERATION RESEARCH which includes certain Methods of decision theory like : minimax, maximin , maximax , minimax regret , laplace and hurwicz. All this methods are explained in detail with the help of solved numerical. This video will help you to understand this methods and ultimately you are able to solve any question of decision theory. I hope this video will be a helpful thing for you to understand the basic concept of decision theory and its methods. Thanks. JOLLY Coaching. DECISION MAKING UNDER RISK AND UNCERTAINTY Decision Making Process Decision-making is the prerogative of management and the nature of the decisions made will vary according to the status of the manager. At board level, fundamental decisions regarding the objectives of the organization, and the development of a corporate plan to fulfill those objectives will be made. Functional and line management will be involved in operational decisions designed to ensure the successful implementation of the planning decisions. At shop floor level, foremen and line supervisors will be involved in determining the best approach to performing more specific tasks. The importance of decision-making _ the function of management must therefore be emphasised, and at the same time a set of criteria and procedures for decision-making must be specified. A formalised decision-making process is essential for efficient management of the organisation. Nature of Decisions Decision-making is concerned with the selection of the preferred course of action from a range of possibilities. The classical concept of decision-making assumes that the decision-maker: Has complete knowledge of all the possible alternative courses of action. Has complete knowledge of the consequences of taking every alternative. Can attach definite payoffs or utilities to each possible outcome. Can order the payoffs of each course of action in a unique sequence from highest to lowest payoff. With these assumptions a decision-maker can be regarded as an optimiser when he selects the alternative course of action with the highest payoff. Four Elements Common to Decision Problems: 1) Actions [Acts/Strategies]: The set of two or more alternatives the decision-maker has chosen to consider. The decision-maker's problem is to choose one action from this set. 2) States of nature: The set of two or more mutually exclusive and collectively exhaustive chance events upon which the outcome of the decision-maker's chosen action depends. 3) Outcomes: The set of consequences resulting from all possible action/state of nature combinations. 4) Objective variable: The quantity used to measure and express the outcomes of a decision problem. We can identify these four specific elements of the decision problem in our example. First, a choice must be made between two possible courses of action-rent the out¬door stadium or rent the indoor stadium. Second, it is uncertain which event will occur-rain or no rain. We refer to these events as states of nature. Note that the states of nature considered in any problem must be mutually exclusive and collectively exhaustive. Third, depending on which action is chosen and which state of nature occurs on the evening of the concert, the decision-maker will receive either a financial reward or a penalty for the chosen action. The consequences of the decision problem are referred to as outcomes; these may be either positive or negative. For example, if the action chosen by the promoter is Rent the outdoor stadium and the state of nature that occurs is Rain, the outcome that results is (-Rs. 2 million). The combination Rent the outdoor stadium/No rain will yield a profit of Rs. 17 million. The reward (or penalty) corresponding to each action/state of nature combination is called the outcome or payoff. Fourth, since the outcome is expressed in terms of net profit, it is objective variable here. Decision Theory, Statistical Decision Making, State of Nature, Statistics, Operations Research, MBA, MCA, BE, CA, CS, CWA, CMA, CPA, CFA, BBA, BCom, MCom, BTech, MTech, CAIIB, FIII, Graduation, Post Graduation, BSc, MSc, BA, MA, Diploma, Production, Finance, Management, Commerce, Engineering , Grade-11, Grade- 12. How to solve decision Theory Practically. Decision Theory numerical question. Decision Theory in operation research. Decision Theory in OP. SOLVING DECISION THEORY. DECISION TREE ANALYSIS. OPERATION RESEARCH. DECISION THEORY. decision theory in hindi. decision theory statistics. decision theory problems. decision theory under uncertainty. decision theory kauser wise
Views: 195992 JOLLY Coaching
Infrastructure Finance by Dr. A. Thillai Rajan,Department of Management Studies,IIT Madras.For more details on NPTEL visit http://nptel.ac.in
Views: 4585 nptelhrd
ROI or Return on Investment calculation, formula and meaning are explained hindi. ROI is a profitability ratio which is also known as Return on Capital. In this video we learn the basics of Return on Investment. In coming videos, we will learn in detail about Return on Assets, Return on Capital Employed (ROCE) and Return on Equity. Related Videos: Return on Equity (ROE): https://youtu.be/K-OhdUGqdzc ROCE (Return on Capital Employed): https://youtu.be/FjWuma0U2x0 Return on Assets: https://youtu.be/7z9jDKNub6U Profitability Ratios: https://youtu.be/pHgiuO2ZYoU Financial Ratios & Analysis: https://youtu.be/CZscpOND3Vs इस वीडियो में ROI या Return on Investment की कैलकुलेशन, फार्मूला और मीनिंग को हिंदी में समझाया गया है। ROI एक प्रोफिटेबिलिटी रेश्यो होता है जिसे रिटर्न ऑन कैपिटल के रूप में भी जाना जाता है। इस वीडियो में हम Return on Investment के बारे में कुछ आधारभूत बातों के बारे में जानेंगे। आने वाले वीडियो में हम रिटर्न ऑन एसेट्स, रिटर्नऑन कैपिटल एम्प्लॉयड (ROCE) और रिटर्न ऑन इक्विटी के बारे में विस्तार से समझेंगे। Share this Video: https://youtu.be/ij7y5e2MVG4 Subscribe To Our Channel and Get More Property and Real Estate Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g If you want to become an Expert Real Estate investor, please visit our website https://assetyogi.com now and Subscribe to our newsletter. In this video, we have explained: What is the return on investment or ROI? What is the meaning of ROI? How to calculate ROI? What is the full form of ROI? What is the method of return on investment calculation? How to implement the ROI calculation formula? How to calculate the expected return on investment? How to apply the ROI formula to calculate the profitability ratio of an investment? How to calculate Return on Capital? How to ROI calculation can help making a right investment decision? How to compare investment opportunities using return on investment formula? How to avoid losses using ROI calculation? How to calculate the overall profit of an investment? What is the return on capital? Make sure to Like and Share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Linkedin - http://www.linkedin.com/company/asset-yogi Google Plus – https://plus.google.com/+assetyogi-ay Twitter - http://twitter.com/assetyogi Instagram - http://instagram.com/assetyogi Pinterest - http://pinterest.com/assetyogi/ Facebook – https://www.facebook.com/assetyogi Hope you liked this video in Hindi on “Return on Investment (ROI)”.
Views: 38812 Asset Yogi
ACCA F9 Investment Appraisal Under Uncertainty - Sensitivity Analysis Free lectures for the ACCA F9 Financial Management To benefit from this lecture, visit opentuition.com to download the free lectures notes used in the lecture and access all our free resources including all F9 lectures, practice tests and Ask the Tutor Forums. http://opentuition.com/acca/f9/ Please go to opentuition to post questions to ACCA F9 Tutor, we do not provide support on youtube. *** Complete list of free ACCA F9 lectures is available on http://opentuition.com/acca/f9/ ***
Views: 13834 OpenTuition
Every investor should have a basic grasp of the discounted cash flow (DCF) technique. Here, Tim Bennett introduces the concept, and explains how it can be applied to valuing a company.
Views: 510717 MoneyWeek
The NPV Calculator at http://www.business-analysis-made-easy.com/NPV-Calculator.html has an example set of cash flows. When you use the calculator with your own data, you can compare multiple projects and decide which one provides the greatest economic benefits. It is helpful if you understand the time value of money concept in order to fully understand this NPV calculator. It simply means that a dollar today is worth more than a dollar at any time in the future. How much less would a future cash flow be when brought back to the present? Well that depends on the discount rate. The reason for this is clear. Money in hand today can be invested with a hope of a return or to payoff debt and reduce interest payments, so it has a greater value than a potential amount in the future. A present value can be calculated for each cash flow that is expected to be received in the future. If you add them all together your result will be the net present value. At http://www.business-analysis-made-easy.com/npv-definition.html is the definition of NPV. If you have a string of cash flows that extend over a number of years, it is hard to decide what the cash flows are worth. NPV gives you a rational value for several cash flows with just one number. So we first need to decide on a discount or hurdle rate. The discount rate is the minimum rate of return that you would be willing to accept on your money. If done manually you would reverse compound each of your cash flows back to the present. If you have a cash flow of $2500 that will be received 3 years into the future and your discount rate is 7% then the present value (PV) of that cash flow would be $2500/((1.07)x(1.07)x/(1.07))=$2,040.74. So if you have a cash flow at 5 years in the future you would divide by 1.07, 5 times. Adding all the present values of the project together gives you the NPV or the Net Present Value. Also see http://www.business-analysis-made-easy.com/Calculate-NPV.html for a more in depth discussion of calculating NPV. This NPV calculator calculates net present value for up to 25 cash flows. Net present value is what a series of discounted cash flows in the future would be valued at today as calculated using a hurdle rate that represents your minimum attractive rate of return (marr). You might want to know the net present value of an income property (real estate, oil well, etc.), for example. The result would give you an estimate of the price at which the property could be bought or sold for (based on your minimum expected return - http://www.business-analysis-made-easy.com/Hurdle-Rate.html. The Net Present Value Calculator You see dual cash flows. The first column is an example. The second column is for you to enter your data. To obtain a NPV for your cash flows, enter the cash flows of your project. A decision of what discount rate to evaluate with needs to be made. The year column can be changed by just changing the first year. Play close attention to the numbers that you put into your analysis. Your decision should not be based on a “Garbage in, garbage out" result. It is important to know what net present value (NPV) is before proceeding to calculate NPV. NPV is defined as the sum of the present values of a time series of cash flows. It is a widely used method for using the time value of money to determine the value of long term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or lack of cash flows in current present value terms after the discount rate has been applied. When you calculate NPV, you are summarizing the value of a cash flow over time into a single equivalent number. With the NPV calculated, you can use it to compare with other cash flow streams. This can help you determine which alternative is most economical for your organization. Net Present Value "Net Present Value is today's value for a project's lifetime of cash flows." When you have money coming in and going out over a period of time, you must take into account the time value of money. If you were to just add all the cash flows over time you would be making the assumption that the time value of money or the interest rate is zero. To determine the NPV of a set of cash flows, you must use an interest rate that defines the current time value of money. Each organization should decide what that interest rate is. It should include a base rate (probably a government set rate) and an inflation rate (current industry inflation rate). Each cash flow must be brought back to present with a reverse compounding method. When you calculate NPV, you have a single number with which to compare other projects. Choose the highest NPV projects for the largest profit. If your cash flows are costs, then choose the project with an NPV closest to zero. Watch: The Secret to Understanding the Time Value of Money https://youtu.be/zHa962SpmAU Playlist https://www.youtube.com/playlist?list=PLQdusHdlvI7QxCF6zcnG5YSD8PYmALJjV
Views: 2844 Daryl & Martha Reavis
Would adding capability that would increase sales, but also cause a launch delay, be the right thing to do? This 90-minute webinar will show you how to develop a simple, yet powerful Project Economic Model to make economically driven project decisions. In this webinar you will learn: - How to use Basic Profit & Loss calculations to make project decisions - How to calculate the cost of delaying your product launch - How to make project tradeoffs based on profit - How to accommodate uncertainty in tradeoff decisions - How the analysis of in-project trade-offs can be certain, even when sales volume forecasts are not - Tips on successfully implementing a Project Economic Model
Views: 694 Playbook
We began the class today by extending the return on capital concept to entire companies and argued that notwithstanding its accounting limitations, comparing the return on capital to the cost of capital provides us with a basis for measuring whether a company’s existing investments are good (or not). If you are interested and want some light reading material for your flight to Jamaica (which is where I am sure you are going for Spring break), try this absolutely scintillating, cannot-be-put-down, amazing (not, not and definitely not) blog post that I put up at the start of this year on the topic: http://aswathdamodaran.blogspot.com/2016/01/january-2016-data-update-5-making-case.html We then returned to the Rio Disney analysis and moved from earnings to cash flows, by making three standard adjustments: add back depreciation & amortization (which leaves the tax benefit of the depreciation in the cash flows), subtract out cap ex and subtract out changes in working capital. Finally, we introduced the key test for incremental cash flows by asking two questions: (1) What will happen if you take the project and (2) What will happen if you do not? If the answer is the same to both questions, the item is not incremental. That is why "sunk" costs, i.e., money already spent, should not affect investment decision making. It is also the reason that we add back the portion of allocated G&A that is fixed and thus has nothing to do with this project. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfUGspr16/Session13.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session13atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session13asoln.pdf
Views: 2356 Aswath Damodaran