Overview
-
Learn how to make long-term business decisions using net present value (NPV) and internal rate of return (IRR), including how to apply the foundations of the time value of money.
Syllabus
-
Introduction
- Making informed business decisions
- Understanding the time value of money
- Time value of money: Applying these ideas
- Overview of time value of money terms
- Computing the time value of money
- Future cash flows and buying a car
- Basic idea: Cash flows, timing, and risk
- Risk and interest rates
- Forecasting cash flows
- Simple discounted cash flow valuation example
- Introducing capital budgeting
- Capital budgeting overview
- The internal rate of return (IRR)
- Example: Buying a car in Hong Kong, changing forecasted cash flows
- Example: Buying a doughnut machine
- Cash flows for Lily Company Machine
- Calculate NPV and IRR
- Spreadsheet analysis: Analyzing cash flows by item and year
- The opportunity cost of cash under the mattress
- The time value cost of a working capital requirement
- Income taxes: After-tax cash flows from revenues and expenses
- Income taxes: The value of the depreciation tax shield
- Computing NPV and IRR with all the complexities
- Spreadsheet analysis: Sensitivity to changes in estimates
- Capital budgeting helps structure your thinking
