BU393 Lecture 3: Chapter 9 - NPV and Other Investment Rules
Document Summary
Chapter 9: net present value and other investment rules. Classifying by type: expansion, add product lines, increase capacity, improve productivity, m&as, most risky. I(cid:373)p(cid:396)o(cid:448)es fi(cid:396)(cid:373)"s a(cid:271)ilit(cid:455) to p(cid:396)odu(cid:272)e o(cid:396) (cid:373)a(cid:396)ket its p(cid:396)odu(cid:272)ts: replacement, replace assets that have become obsolete, even though the object still has some market value, if it adds value, might want to replace it, ex. Purchase a new computer system: mandatory, legislated by government or other regulatory body, ex. Classifying by relationship: mutually exclusive, acceptance of 1 stops the adoption of 2, ex. Deciding between 2 computer systems or 2 call centre locations: one or the other, ranking the decisions/alternatives. Independent: cash flows of 2 projects and decision to accept are unrelated, ex. If the npv is (cid:1008)(cid:1004), the(cid:374) it (cid:449)ill add (cid:1008)(cid:1004) (cid:449)o(cid:396)th of value to the firm: *depends on knowing what k is (weighted average cost of.
