Category Archives: NPV

Independent and Mutually Exclusive Projects

Independent and Mutually Exclusive Projects Understanding of classification of capital budgeting projects plays a crucial role while analyzing viability of projects. What is mutually Independent Projects? A Project whose cash flows have no impact on the acceptance or rejection of other projects is termed as Independent Project (not mutually exclusive). Thus, all such Projects which meet… Read More »

Internal Rate Of Return And Mutually Exclusive Projects

Internal Rate Of Return And Mutually Exclusive Projects……. What’s the Concern? While considering the mutually exclusive projects, IRR technique can be misleading. Investment projects are said to be mutually exclusive if only one project could be accepted and others would have to be rejected. NPV and IRR methods for project evaluation leads to conflicting results… Read More »

Capital Structure and Cash Flows

Capital Structure and Cash Flows On one hand, operations of the company may help in forecasting of future cash flows but in addition to this, future cash inflows and outflows can also be accessed through company capital structure. A corporation may use different combinations of equity, debt, or mixture of securities to finance its assets… Read More »

Present Value of Multiple Cash Flows

Present Value of Multiple Cash Flows We come across many cases where we have to determine the present value of series of multiple cash flows. There are two ways we can calculate present value of multiple cash flows. Either we discount back individual cash flow at a time, or we can just calculate the present… Read More »

Internal Rate of Return

Internal Rate of Return Internal Rate of Return is another important technique used in Capital Budgeting Analysis to access the viability of an investment proposal. This is considered to be the most important alternative to Net Present Value (NPV). IRR is “The Discount rate at which the costs of investment equal to the benefits of… Read More »

Payback Period

Payback Period Payback period is the first formal and basic capital budgeting technique used to assess the viability of the project. It is defined as the time period required for the investment’s returns to cover its cost. Payback period is easy to apply and easy to understand technique; therefore, widely used by investors. For example, an investment… Read More »

How To Use Financial Calculator?

How To Use Financial Calculator? The financial calculator is considered as easiest and less time-consuming tool for computation of basic as well as advanced financial analysis techniques. A financial calculator is an ordinary calculator featuring few advanced and complex financial formulas so it can compute things like present value etc. financial calculator is really helpful as… Read More »

Financial Management and Capital Budgeting

What is Capital Budgeting? In financial management, Capital budgeting is the process which enables the management to decide which, when and where to make long-term investments. Businesses always look for opportunities that increase shareholder wealth. In capital budgeting, the managers try to figure out investment opportunities that are worth more to the business than they cost… Read More »