Category: FINANCIAL MANAGEMENT

Terminal Value Method is based on the assumption that cash inflows of each year is reinvested in another in another outlet at a certain rate of return till the economic life of the project. Decision Criteria If IRR > Cost of Capital        = Accept If IRR <Cost of Capital          = Reject    

Internal Rate of Return (IRR) is also known as Time-adjusted rate of return. IRR is the rate at which NPV becomes zero. In other words, we could say that IRR is the rate at which present value of cash inflows and present value of cash outflows will be equal. In this technique, unlike net present value, we are not given Read More …

Profitability Index method is also known as Benefit-Cost Ratio Method. It is based on Net Present Value method and calculates the benefit on per rupee investment. Merits of PI It is superior to NPV It gives due consideration to the time value of money and cost involved in the project. PI techniques give better result in case of projects having different Read More …

The Net Present Value Method (NPV) Method is a discounted cash flow technique. This method compares between cash inflows and cash outflows occurring at the different time period. The major characteristic of this method is that it takes into account the time value of money and all cash inflows and outflows are converted to present value. Note: If working capital Read More …