BEC_investment decisions

Question 1

payback period method

Answer 1

CF (or discount CF) added until payback of initial investment

Question 2

accounting rate of return method (ARR)

Answer 2

AV net income during the investment project / AV investment

Question 3

net present value method (NPV)

Answer 3

Sum [CF at PV] - initial investment > 0

Question 4

internal rate of return method (IRR)

Answer 4

Sum [CF / IRR] = 0, IRR > hurdle rate

（注）hurdle rateには、WACCが使われる。

Question 5

profitability index (PI)

Answer 5

Sum [discount CF] / initial investment > 1

Question 6

tax shield

Answer 6

loss X tax rate