Syllabus Overview

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View Syllabus Outline (4 topics)

Investment Decisions & Techniques

1. Capital Budgeting Techniques

  • Non-Discounted Techniques:
    • Payback Period: Time required to recover the initial project outlay.
    • Accounting Rate of Return (ARR): Average accounting profit divided by average investment.
  • Discounted Techniques:
    • Net Present Value (NPV): Sum of present values of cash inflows minus cash outflows. Accept if $NPV > 0$.
    • Internal Rate of Return (IRR): The discount rate where $NPV = 0$.

2. Cost of Capital

The minimum return a company must earn on its projects to maintain market value and satisfy its investors.