Capital budgeting techniques

(Explanations)

Learning objectives:

  • Explain the difference between simple and compound interest.
  • Explain the concept of time value of money.
  • Compute the present value of a single sum and an annuity.
  • Analyze investment projects using major capital budgeting techniques like net present value, internal rate of return, payback period and accounting rate of return.
  • Explain the concept of after-tax cost, after-tax benefit and after-tax cash flow.
  • Explain how income tax impacts the computation of net present value of a project.
  • Explain the procedure of capital rationing.

Number of pages: 9
Approximate time required: 3 – 4 hours

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