Introduction
Making informed business decisions
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1. Time Value of Money and Risk-Adjusted Interest Rates
Understanding the time value of money
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Time value of money: Applying these ideas
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Overview of time value of money terms
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Computing the time value of money
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2. Discounted Cash Flow Analysis
Future cash flows and buying a car
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Basic idea: Cash flows, timing, and risk
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Risk and interest rates
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Forecasting cash flows
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Simple discounted cash flow valuation example
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3. Capital Budgeting: NPV and IRR
Introducing capital budgeting
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Capital budgeting overview
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The internal rate of return (IRR)
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Example: Buying a car in Hong Kong, changing forecasted cash flows
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Example: Buying a doughnut machine
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4. Practice: Cash Flows by Item or by Year?
Cash flows for Lily Company Machine
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Calculate NPV and IRR
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Spreadsheet analysis: Analyzing cash flows by item and year
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5. Practice: Working Capital Plus Income Taxes
The opportunity cost of cash under the mattress
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The time value cost of a working capital requirement
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Income taxes: After-tax cash flows from revenues and expenses
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Income taxes: The value of the depreciation tax shield
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Computing NPV and IRR with all the complexities
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Spreadsheet analysis: Sensitivity to changes in estimates
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Conclusion
Capital budgeting helps structure your thinking
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Glossary_AccountingFoundations_BusDecisions_IRR_NPV.zip
(1.0 MB)