F11-investment decision Flashcards
1
Q
NPV investment rule
A
take alternativ with highest NPV
2
Q
NPV profile
A
a graph of the project’s NPV over a range of discount rates (cost of capital)
3
Q
IRR investment rule
A
take any investment where IRR exceeds costs (IRR is discount rate that sets NPV=0)
4
Q
the payback rule
A
accept if cash flow pay back initial investment within respecified time
5
Q
profitability index
A
identify the optimal combination of projects when projects have different resource requirements
NPV/resource consumed
