COM 240 Chapter 9: PDF COM 240 Notes - Ch. 9

• School: University of Victoria
• Department: Commerce
• Course: COM 240
• Professor: Majerbi Basma

Document Summary

Com 240 - chapter 9: net present value & other investment criteria: capital budgeting: the process of planning & managing a rm"s investment in xed assets. Identify investment opportunities that add value to the rm. Most fundamental decision concerns a business"s product line. (i. e. whether or not to launch a new product, enter a new market, etc. ) Xed-asset investments are generally long-lived & not easily reversed once made xed assets de ne the business of a rm. Capital budgeting question is therefore probably the most important issue in corporate nance: net present value (npv): difference between an investment"s market value of future cf"s & it"s cost. Discounted cash ow (dcf) valuation: the process of valuing an investment by discounting its future cash ows. Npv rule: an investment should be accepted if the nvp > 0, & rejected if npv < 0: a positive nvp is expected to add value to the rm, therefore increasing the wealth of owners.