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The capital budgeting Decision
Requires the determination of the yield on an investment with subsequent cash inflows.
Time reqired to recoup the initial investment.
rnking ivestment poposals
1. Payback Method
2. Internal Rate of Return
3. Net Presemt Value
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
1. profitability equal /exceed the cost of capital
2. Projects that are mutually exclusive
3. Projects that are not mutually exclusive