Finance Fundamentals

Introduction to Net Present Value (NPV), what it is, how it is calculated, and how it can be used to make decisions on investments. We will practice drawing good timelines to keep track of numbers while working through an example.

Overview of the different types of costs, and which costs are relevant to Net Present Value (NPV) in our decision to accept or reject an investment project.

Identifying the relevant costs to Net Present Value (NPV) in our decision to accept or reject an investment project, with a particular focus on costs we should not consider (such as sunk costs), and costs we should consider (such as opportunity costs).

Using the Internal Rate of Return (IRR) method in deciding whether to accept or reject an investment project. We learn about what IRR means, how it is calculated, how to interpret it, and how it can be used to evaluate investment project decisions.

Comparing different methods to evaluate a project: net present value (NPV), internal rate of return (IRR), payback periods, and average accounting return. What are the advantages and disadvantages of each method when considering whether to accept or reject an investment project? When is it most appropriate to use each method?