About This Chapter
Investment Decisions - Chapter Summary
Get a quick and informative refresher of investment decision concepts anytime and from any computer or mobile device using this chapter. Engaging lessons provide clear definitions, explanations and examples of topics that include capital budgeting, payback analysis and sensitivity analysis. Navigate these lessons at your own pace. In no time, you will be ready to:
- Discuss the meaning and process of capital budgeting
- Explain the basics of net present value, discounted cash flow and time value of money
- Describe how to use the net present value method to evaluate a budget
- Define and discuss the uses of the internal rate of return method
- Share the definition and how to apply the formula for payback analysis
- List and describe three investment analysis tools
- Provide the definition of sensitivity analysis
This chapter's resources make it easy to feel confident in your readiness to address investment decision questions in class. Engaging lessons give you the opportunity to examine this subject area at a comfortable pace. Multiple-choice quizzes help you assess your comprehension of the concepts you explore in the lessons. A practice exam is also available to get a well-rounded review of the chapter.
1. Capital Budgeting: Definition & Process
From time to time, businesses must purchase large pieces of equipment to replace older equipment or expand product lines. In this lesson, you'll learn how businesses budget for these purchases.
2. Discounted Cash Flow, Net Present Value & Time Value of Money
Explore the concept of time value of money and learn about ways to determine the profitability of different investment options using the net present value of the future cash flows, discount rates, and a project profitability index.
3. Evaluating a Budget Using the Net Present Value Method
Explore the net present value method of capital budgeting and the associated decision rules for accepting or rejecting capital projects. Evaluate a capital budget and decide which projects should be accepted.
4. Internal Rate of Return Method: Definition & Calculation
Financial management involves determining which long-term investments are right for a company. There are several techniques used by management to analyze potential investments and determine their worthiness. One technique is the internal rate of return method.
5. Payback Analysis: Formula & Example
Payback analysis is an important financial decision-making tool. In this lesson, you'll learn what it is and how to apply the formula, and you'll see an example of payback analysis. You'll also have a chance to take a short quiz after the lesson.
6. Investment Analysis Tools
The key objective of a corporate finance team is to find ways to optimize the company's resources, including how to invest cash. In this lesson, we'll discuss three important tools that can be used to analyze the potential of any given investment.
7. What Is Sensitivity Analysis? - Definition & Example
How does a manager know if a change is going to have a positive impact on a business? How sensitive will the operations be to making an adjustment? Doing a sensitivity analysis will help evaluate what the potential result will be.
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- Capital Management Overview
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