Financial Times Handbook of Corporate Finance, 2nd Edition

2

STATE-OF-THE-ART PROJECT APPRAISAL TECHNIQUES

IntroductionHow do you know whether an investment generates value for shareholders?State-of-the-art technique 1: net present valueState-of-the-art technique 2: internal rate of returnChoosing between NPV and IRRConclusionAppendix 2.1 Mathematical tools for finance

Introduction

Shareholders supply funds to a firm for a reason. That reason, generally, is to receive a return on their precious resources. The return is generated by management using the finance provided to invest in real assets. It is vital for the health of the firm and the economic welfare of the finance providers that management employ the best techniques available when analyzing which of all the possible investment opportunities ...