BU223 Study Guide - Final Guide: Quadratic Equation, Net Present Value
Document Summary
Present value of all cash inflows and outflows. The length of time it takes to payback initial investment. The length of time it takes all pv of inflows to payback initial investment. Accept if project pays back before cut-off time. Accept highest ratio is equal to/exceeds greater than company"s company"s target ratio. Accept if pi > 1 expected target ratio. Payback: some projects never payback at all, payback also never looks past cut-off, cut-off date is also too arbitrary. Arbv: if company is in loss position, its ratio is too negative. However, if industry is also in loss position, we use market etc. This means that the target for measurement is too arbitrary.
