CHAPTER 10 INQUIRY Financial Management Service Fms Treas Form

Instructions and help about CHAPTER 10 INQUIRY Financial Management Service Fms Treas

Chapter ten making capital investment decisions. In the previous chapter, which was Chapter nine in this class, we looked at four very different ways to figure out if an investment opportunity is worth it or not worth it. We looked at the net present value technique the profitability index technique the payback period technique and the internal rate of return technique. And from those four methods we saw how do you all have some advantages and disadvantages. But the net present value approach was by far the most accurate one in identifying if a project should be accepted or reject. And so what we are going to be doing in this chapter is focusing more on the Net Present Value approach to evaluating an investment. So just to remind you again in the net present value approach we consider the cashflows that would take place. If the project is accepted Right away we would need to spend a lot of money. That's a typical investment project. The cashflow in year 0 or today is called initial cos