f and i chap 7and 8

when irr > cost of capital goods

accept

irr - cost of capital goods

room for error

npv depends on

cost of capital goods sold

when is the irr rule guarenteed to wrok in stand alone projects

when the negative cash flows precede the positive ones

fallback of irr rule

delayed investment

multiple irr’s

non existent irr

pay back rule

accept an investment if it pays back its initial investment within a pre specified time

issues with pay back rulkle

ignores time value of money and cost of capital

ignoes cash flows post pay back period

ad hoc criterion what is a good amount of yers LOL

why use the payback rule then

becausenit used for small deciosn

budgeting

onlky when it fails people take the tuke out to calculate npv

when cost of capitak and growth is givne the formul a for perpetuity shifts

c/ g-cost of capital

p.i index

exhausts the resource

simgle resource constraint whre in practice therwe owuld be multiple