Questions:
Net Present Value and Other Investment Rules
Consider the following as you read:
1. Describe how net present value is used in the financial decision making process.
2. Explain the disadvantages of using the payback method.
3. Compare and contrast the internal rate of return (IRR) method from the net present value method (NPV)
Making Capital Investment Decisions
Consider the following as you read:
1. Explain the effects of sunk costs and opportunity costs in deciding whether to accept a project.
2. Review the financial considerations a company should make before investing in a project.
3. Understand how net working capital, depreciation and interest influence the decision to buy or not to buy.
4. Explain how inflation and interest rates affect the capital budgeting process.
Risk Analysis, Real Options, and Capital Budgeting
Consider the following as you read:
1. Review the types of assumptions used in sensitivity and scenario analysis.
2. Describe how the options to expand or abandon a project are integrated in the capital budgeting process.