Capital Budgeting: Net Present Value and Internal Rate of Return

Overview/Description
Organizations rely heavily on quantitative tools such as net present value (NPV) and internal rate of return (IRR) measures to assess which projects to undertake through the capital budgeting process. These tools are based on the time value of money concept, which enables you to calculate the present value of expected project returns and compare projects based on their present value. The course explains the time value of money concept, and shows how to determine net present value and internal rate of return for projects. It explores the strengths and limitations of each of these methods for making decisions, and demonstrates how to use their decision rules to determine which capital investment projects will add the most value to your organization.

Target Audience
Finance and nonfinance professionals, functional managers, executives, and all individuals in key roles involved directly or indirectly with the capital budgetary planning and process in an organization

Expected Duration (hours)
1.0

Lesson Objectives

Capital Budgeting: Net Present Value and Internal Rate of Return

recognize the value of quantitative assessment techniques

describe the time value of money

calculate net present value (NPV) for a project

interpret NPV under various project circumstances using the NPV decision rules

apply the IRR decision rule

use NPV and IRR to assess potential projects