An initial investment is the money a business owner needs to start up a firm. It might include the business owner's own money, money borrowed from an array of sources including family and friends or banks, or capital raised from investors. The term initial investment is also used as the money a business owner uses to invest in a capital investment venture such as a piece of equipment or a building.

IRR
The higher a projects internal rate of return, the more desirable it is to invest in the project. Some ways to use the IRR method are: • Discounted Cash Flow Analysis - Find the interest rate return that you would receive as your investment return rate. • Capital Budget Planning - Go through the capital budget process so that you make the best economic decision. • Discounted Cash Flow Analysis - When you calculate IRR you will have one number for an objective comparison between capital projects. • Investment Calculator - Determine if a potential investment is a good choice or not. • Compound Rate of Return - Understand the compounding effect of interest on investments. ("Calculating internal rate,")

Deciding between investments

You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its revenues will grow at 2% per year for every year after that.

a. Which investment has the higher IRR?

a)

Since IR is defined as the rate of return that makes the NPV = 0:

...Chapter 7— NetPresentValue and Other Investment
Question 1 : List the methods that a firm can use to evaluate a potential investment.
There are discounted and non-discounted cash-flow capital budgeting criteria to evaluate proposed investments. They are
1) Netpresentvalue: NPV is a discounted cash flow technique, which is the difference between an...

...cash
a. Is this a real or financial asset?
b. Is society any richer for the discovery?
c. Are you wealthier?
d. Is anyone worst off as a result of the discovery?
2. The average rate of return on investment in large stocks has outpaced that on investments in T-Bills by about 8% since 1926 in US. Why, then, does anyone invest in T-Bills?
3. You see an advertisement for a book that claims to show how you can make RM1 million with no risk...

...require the same initial investment but generate different cash flows in the future.
We apply four evaluation methods including: simple return on investment, payback method, IRR and NPV. Compare the result and rank it based on outcome. The discussion is as following:
1）
According to the excel calculation, each project’s rate on investment is:
The formula of rate on investment is:
In the case, the cost of investment...

...Netpresentvalue
In finance, the netpresentvalue (NPV) or netpresent worth (NPW) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the presentvalues (PVs) of the individual cash flows. In case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the...

...MEMORANDUM
To Apex Investment Partners:
According to my analysis of the Accessline’s proposed term sheet, I do not believe that Apex would serve its own interests, or those of its investing partners, by investing in Accessline according to the terms proposed. By investing at the proposed valuation, according to the proposed control and incentive structure, Apex would be shouldering a disproportionate share of the risk should Accessline fail to meet its performance...

...applying NetPresentValue, what factors do we include, and what factors do we ignore?
Use cash flows not accounting income
Ignore
* sunk costs
* financing costs
Include
* opportunity costs
* side effects
* working capital
* taxation
* inflation
2. Practice Questions
a) After spending $3 million on research, Better Mousetraps has developed a new trap. The project requires an initial...

...be 13.487% and a Weighted Average Cost of Capital (WACC) to be at a value of 9.70%. Factoring in the WACC into our projections we found that if the demand maintains at an average rate the project will be at a positive NetPresentValue of $5,997,505.31 with an IRR of 13.21%, a profitability index of 8.84, and an approximate payback period of 6.84 years. Please see Exhibits below for a snapshot of the capital budget and NPV...

...Reserve of cash flow hedge will primarily be in relief to economic account in the following exercise.
The Group is exposed to consequential risks by the variation of the rates of change, that you/they can influence on its economic result and on the value of the clean patrimony. Particularly:
Whereas the societies of the Group sustain costs denominated in different currencies by those of denomination of the respective proceeds, the variation of the rates of change can influence...

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