COMM-2026EL Chapter 9: NPV and Other Investment Criteria
21 Nov 2017
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Chapter 9 - npv a(cid:374)d other i(cid:374)vest(cid:373)e(cid:374)t criteria. The capital budgeting question is likely the most important issue in corporate finance, as fixed assets define the business of the firm. When evaluating each method and determining which to use, it is important to look at three very important criteria and ask yourself the following questions: An investment is worth undertaking if it creates value for its owners. Net present value (npv) the difference between an investment"s market value and its cost (how much value is created or added today by undertaking an investment) Discounted cash flow valuation (dcf) valuing an investment by discounting its future cash flows. We begin by trying to estimate the future cash flows that we expect the new business to produce. We then apply our basic discounted cash flow procedure to estimate the pv of those cash flows.
