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Capital Budgeting Superfactory Excellence Program™ www.superfactory.com
Time Value of Money ,[object Object],Look in Appendix C of this Chapter for the Present Value of an  Annuity  of $1 Table
The Net Present Value Method ,[object Object]
The Internal Rate of Return Method Find the 10-period row, move across until you find the factor 5.216.  Look at the top of the column and you find a rate of  14% . Using the present value of an annuity of $1 table . . .
The Total-Cost Approach If we install the new washer, the investment will yield a positive net present value of $83,202.
Ranking Investment Projects The higher the profitability index, the more desirable the project. Profitability  Present value of cash inflows   index  Investment required =

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Capital Sample

  • 1. Capital Budgeting Superfactory Excellence Program™ www.superfactory.com
  • 2.
  • 3.
  • 4. The Internal Rate of Return Method Find the 10-period row, move across until you find the factor 5.216. Look at the top of the column and you find a rate of 14% . Using the present value of an annuity of $1 table . . .
  • 5. The Total-Cost Approach If we install the new washer, the investment will yield a positive net present value of $83,202.
  • 6. Ranking Investment Projects The higher the profitability index, the more desirable the project. Profitability Present value of cash inflows index Investment required =