Term
| Net Present Value (Calculator) NPV: |
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Definition
The difference between and investments market value and its cost.
-accept if greater or equal to zero (the net value is positive and reject if negative)
-WACC
-Best for Mutually exclusive projects
-when in doubt, use this method |
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Term
| Modified Internal Rate of Return (MIRR): |
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Definition
| -Accept if MIRR is greater than WACC |
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Term
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Definition
The amount of time (period in number of years) for an investment to generate cash flow sufficient to recover initial cost.
-if the percentage is higher we accept
-project that gives you
-ignore time value of money |
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Term
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Definition
| -Based on the discounted payback rule, an investment is acceptable if its discounted payback is less than some pre-specified number of years. |
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Term
| Internal Rate of Rate (IRR): |
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Definition
| -Discount rate that causes the NPV of the project to equal zero. |
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Term
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Definition
-this or the other, not both at the same time
-NPV, which needs WACC |
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Term
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Definition
-higher or equal to 1, accept
-initial cash flow divided by initial investment
-for every dollar invested |
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Term
| Equivalent Annual Annuity (EAA): |
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Definition
| -lowest cost, highest revenue |
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