Engineering Economy Investment Decision Methods (Slides)

23 Pages Posted: 25 Jan 2011 Last revised: 26 Feb 2013

See all articles by Ignacio Velez-Pareja

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: March 29, 2011

Abstract

In this chapter we deal with the popular methods for appraising investments: the Net Present Value NPV, the Internal Rate of Return IRR and the profitability Index or Benefit Cost Ratio B/CR. We use intensively the spreadsheet.

We also present critically a popular method ie the Payback Period that does not take into account the time value of money, TVM. We show alternatives to improve the tool while preserving its feature of taking into account the risk.

Keywords: Net Present Value, NPV, Internal Rate of Return, IRR, Profitability Index, Benefit Cost Ratio B/CR, Payback Period

JEL Classification: G31

Suggested Citation

Velez-Pareja, Ignacio, Engineering Economy Investment Decision Methods (Slides) (March 29, 2011). Available at SSRN: https://ssrn.com/abstract=1747031 or http://dx.doi.org/10.2139/ssrn.1747031

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

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