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Requires the determination of the yield on an investment with subsequent cash inflows.

payback method

Time reqired to recoup the initial investment.

rnking ivestment poposals

1. Payback Method
2. Internal Rate of Return
3. Net Presemt Value

dcision-making process

1. search/discover investtment opportunities
2. Collection of data
3. Eavaluationf og decision making
4. Revaluation of adjustment

net present value

discounting back the inflows over the life of the investment to detemine whether they equal or exceed the requred investment.


PV of cash inflows - Pv of cash outflows

selectioon strategy

1. profitability equal /exceed the cost of capital
2. Projects that are mutually exclusive
3. Projects that are not mutually exclusive

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