By the end of this chapter, you should be able to:
• Apply time value of money tools to capital investment projects.
• Calculate the weighted average cost of capital.
• Explain why it is necessary to justify an investment.
This chapter provides a bridge between the discussion of risk and return (Chapter 6) and managing long-term assets (Chapter 8). Operating managers who want their company to invest in a long-term asset that will help them achieve operating performance objectives are generally asked to “justify” the investment. In other words, the managers must demonstrate ...