What will make the NPV of the investment be equal to zero?

The IRR

Need to know the relationship between NPV and IRR and discount rate?

Internal rate of return is the interest rate that sets the project’s NPV at zero

Ex. If the NPV is positive and discount rate is 12% then my IRR should be what?

Is greater than 12 percent.

Know your discounted models and nondiscounting models?

Nondiscounting models Payback period and Accounting rate of return

Discounting models Net Present value and Internal rate of return

Know how depreciation affects all methods?

Profitability index= sales- expenses

Ex. if my profit is zero then how does that effect IRR and the discount rate?

If the NPV is negative therefore, the discount rate is what related to the IRR?

Rank project according to NPV.

Rank project according to NPV and profit. ( be careful with depreciation)

Payback period method (6 questions)

Accounting rate of return (5 questions)

Net present value (3 questions)

Internal rate or return (3 questions)

Assign the best driver to a department

Ex. Human resource dept ---what will be the driver? Direct labor hours

Support departments - Maintenance, grounds, engineering, housekeeping, personnel, and

storage

production departments - grinding and assembly

One problem either direct, single, sequential method