following questions in your write-up.
1. What are the advantages and disadvantages of Rosetta Stone going public?
2. What do you think the current market price is for Rosetta Stone shares? Justify your valuation using both discountedcashflow and comparables (market multiples) analysis.
3. At what...
the advantages and disadvantages of the following investment rules: Net
Present Value (NPV), Payback Period, Discounted Payback Period, Internal Rate of Return (IRR)
and Profitability Index (PI). (You can start by considering the following questions for each
investment rule: Does it use cash flows...
(Based on discountedcashflow valuation).
Step1: Estimate the future cashflows we expect to new business to produce.
Step 2: Calculate the present value of those cashflow (based on discountedcashflow procedure)
Step 3: Calculate NPW between the present value of future cashflows and the cost...
for a project or investments cash outflows to be recovered by cash inflows generated from the same project or investment. It is a very simple and commonly used capital budgeting technique. The formula used to compute the payback period is initial investment divided by cash inflow per period. You generally...
the advantages and disadvantages of the following investment rules: Net Present Value (NPV), Payback Period, Discounted Payback Period, Internal Rate of Return (IRR) and Profitability Index (PI). (You can start by considering the following questions for each investment rule: Does it use cashflows or...
Theory Questions (Exam focus, part 1)
(a) Advantages & disadvantages of Payback, Average Rate of Return, Net Present Value & Internal Rate of Return
Payback Period
Payback Period = Investment (Cost of Project) / Annual Cash Inflows
AdvantagesDisadvantages
Simple, easy to understand
Ignores time...
D. 1. 2. 3. 4. 5. 6.
INVESTMENT APPRAISAL The nature of investment decisions and the appraisal process Non-discountedcashflow techniques Discountedcashflow techniques Allowing for inflation and taxation in DCF Adjusting for risk and uncertainty in investment appraisal Specific investment decisions...
which involves the firm in making a cash outlay with the aim of receiving, in return, future cash inflows greater than the initial cash outflow.
It follows that an investment decision has a large implication for the firms cashflows – initially with the outflow of cash upon the purchase of the asset and...
share.
Advantages / Disadvantages of the IPO Decision
There are considerable advantages with obtaining equity through the IPO process. There are, however, some drawbacks that also need to be taken into consideration. Some of the advantages and disadvantages are:
Advantages | Disadvantages |
*...
Case Study Report
Contents
Introduction
Findings
Payback
Discounted Payback
Net Present Value (NPV)
Accounting Rate of Return (ARR)
Internal Rate of Return (IRR)
Sensitivity Analysis
Recommendation
Conclusion
Appendices
Bibliography
...
appraisal method for finance
Question: Advantage and disadvantages of pay back period?
Payback Period
Advantages
Simple to compute
Provides some information on the risk of the investment
Provides a crude measure of liquidity
Disadvantages
No concrete decision criteria to indicate whether an...
years. The formula used to calculate the payback period is:
Payback Period=Cost of ProjectAnnual Cash Inflows
Payback Period=Cost of ProjectAnnual Cash Inflows
Bhandara (1986) explains the advantages of the payback period:
* This method is simple for one to understand.
* The payback period...
purchase of resources or amalgamations of firms are needed for understands in order to obtain arbitrage in Strong Form.
Q2.
Below are the advantage and disadvantage of different investment rules.
Net Present Value is used to calculate the net change in company’s asset with respect to a project after...
Payback Period (PBP) - The time taken by the project to repay the investment or
The time taken where, Cash inflows = Cash Outflows
* Usually expressed in years
It really considers the flow of cash into the business and outside the business
Decision Rule: A project is good if PBP is either equal...
the expected cashflows.
* Risk of projected cashflows must be estimated.
* Given the risk of projected cashflows, the firm must determine an appropriate discount rate.
* Expected cashflows must be converted to present-values.
* Compare present-value of expected cash inflows with...
series of cashflows. It is a standard method for using the time value of moneyto appraise long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cashflows, in present value terms, once financing charges are met. The advantages of the NPV...
Discountedcashflow
From Wikipedia, the free encyclopedia
In finance, discountedcashflow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cashflows are estimated and discounted to give their present values (PVs)—the sum...
FV= future value, i= discount rate, and y= time.
1a) If the discount rate is 0%, what is the projects net present value?
Year CashFlow Discount Rate DiscountedCashFlow
0 -$400,000 0% -$400,000
1 $100,000 0% $100,000
2 $120,000 0% $120,000
3 $850,000 ...
Capital investment appraisals why cashflows are more appropriate than Accounting profits
4) Meaning of Relevant Cashflows and examples of Relevant Cashflows
5) Why Time Value of Money is Key Concept in investment Appraisal?
6) Assumptions of discountedcashflows
7) How inflation may complicate...