Examining Decision Criteria for a Business Case

Chapter 11, “Examining a Business Case: Investment,” looked at the relevant facts surrounding a business case decision. If you worked your way through the case study, you constructed a pro forma income statement and a pro forma cash flow statement. These statements help you to describe the decision quantitatively, but that’s not the end of the decision-making process.

When you evaluate an income or cash flow statement it’s important to keep a criterion called the discount factor in mind. The term discounting refers to the estimation of the present value of future cash flows. For example, ...

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