This Chapter discusses different financial criteria. It again restated the concept of [[Present Value (PV)]] illustrated with the following example:
||Market Value||h
|Asset|Reject Project X|Accept Project X|h
|Cash|1|0|
|Other Assets|9|9|
|Project X|0|PV|
|Total|10|9+PV|
The point here is that if the [[Present Value]] is bigger than the investment, a project is worthwhile doing and directly contributing in a bigger way to the value of a firm. Other financial metrics are:

* [[Book rate of return]]
** Drawback is that this metric takes the average profitability of all past decisions into the equation.
* [[Pay back period]]
* [[IRR]]

If you need to choose a project in the light of limited resources (=always!) than the metric of [[Profitability Index]] may be useful.
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finance_public
created
Thu, 05 Jan 2012 20:40:11 GMT
creator
dirkjan
modified
Thu, 05 Jan 2012 20:40:11 GMT
modifier
dirkjan
tags
Principles of Corporate Finance
creator
dirkjan