Supplement F Financial Analysis

Learning Goals

After reading this supplement, you should be able to:

  1. Explain the time value of money concept.

  2. Demonstrate the use of the net present value, internal rate of return, and payback methods of financial analysis.

  3. Discuss the importance of combining managerial judgment with quantitative techniques when making investment decisions.

Many decisions in operations and supply chain management involve large capital investments. Automation, outsourcing decisions, capacity expansion, layout revisions, building a new distribution center, and installing a new ERP system are only a few examples. In fact, most of a firm’s assets are tied up in the operations function. Therefore, management should seek high-yield capital ...

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