Introduction
Welcome
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Course requirements and structure
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1. Investment
Components of an investment
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Investments and economic capital
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Types of investments
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Opportunity cost
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Time value of money
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Present, future, and terminal values
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Challenge 1: Determine present, future, and terminal values
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Solution 1: Determine present, future, and terminal values
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Real talk: Investments and opportunity costs
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Evaluation methods
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2. Discounted Cash Flow (DCF)
What is DCF?
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Solve for DCF
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Challenge 2: Calculate DCF over 30 years
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Solution 2: Calculate DCF over 30 years
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Pros and cons of DCF
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Real talk: Discounted cash flows
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3. Net Present Value (NPV)
The net present value equation
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NPV using tables
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Challenge 3: Calculate NPV using table values
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Solution 3: Calculate NPV using table values
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A fully worked out example
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NPV using a Microsoft Excel formula
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Challenge 4: Calculate NPV using Microsoft Excel
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Solution 4: Calculate NPV using Microsoft Excel
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Pros and cons of NPV
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Real talk: Net present value
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4. Internal Rate of Return (IRR)
What is IRR?
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IRR calculation the long way
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The case of no IRR
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The case of multiple IRRs
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IRR using the Microsoft Excel formula
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Challenge 5: Calculate NPV and IRR
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Solution 5: Calculate NPV and IRR
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Pros and cons of IRR
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Payback period
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Payback period in Microsoft Excel
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Challenge 6: Choose a project based on NPV, IRR, and payback period
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Solution 6: Choose a project based on NPV, IRR, and payback period
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Real talk: IRR and payback period
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Ex_Files_Investment_Evaluation.zip
(850 KB)