## Why does money have a time unit?

Why does money have a time unit and why do we need to account for it? The answer is that there is an opportunity cost associated with not having money…

## EVA a good measure of value creation

Is EVA a good measure of value creation? We have one more thing to do here, and that thing is let' s agree for just a minute that EVA is a good measure…

## EVA Example

EVA Example But very simple example just to round up the idea of whether a company is creating or destroying value. Let us consider a company that is generating a NOPAT of…

## What is EVA?

What is EVA or Economic value added? EVA or Economic Value Added is a measure of profitability. As a measure of profitability, it is just another way to calculate profits. Therefore, this…

## Creating or Destroying Corporate Value

Creating or Destroying Corporate Value Two managerial mistakes that we tend to see a lot in practice, and believe it or not there's actually the both of them have been very widely…

## Corporate Value Creation

Corporate Value Creation Corporate Value Creation is one of those two issues that are not only important and critical for all companies, but this is also related to that extremely critical variable that…

## Shortcomings of the IRR

Shortcomings of the IRR Now here is another example. Project B and Project B again you get $100 million today, you expect to put down $300 million a year from now, and…

## Saving for Retirement

Early Saving for Retirement Start saving for retirement early, even if you can only afford to put a small amount into your retirement fund each month. Mutual Fund A Mutual…

## NPV Analysis

NPV Analysis What is Discount Rate? The discount rate, in general, is the cost of capital but there might be exceptions to this. So more often than not, we can think of…

## Project Evaluation

Project Evaluation As you will remember that cost of capital is the minimum required return on the company's investments and now we will discuss a little bit about how to build that…

## The Debt Tax Shield

The Debt Tax Shield Let's start with the corporate tax rate, and this is just a very brief example that will show you the tax shelter, the tax break that you have…

## Three Ways to Think about the Cost of Capital

Three ways to think about the Cost of Capital Many people simply refer to terms of the cost of capital as the WACC and the WACC stands for the weighted…

## What is the Cost of Capital?

What is the Cost of Capital? Corporations and investors need to interact in a market because investors are the ones that provide the capital so that the corporations can invest and produce the…

## Diversification of portfolio

Diversification of portfolio What is a diversified portfolio? The lower the correlation between the asset that I bring and the portfolio I already have, the more I stand to gain in…

## What is Diversification?

What is Diversification? Diversification The goal of diversification The ultimate goal of diversification is to maximize, to get the highest possible risk-adjusted returns. When I do diversify a portfolio, would I…