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LinkedIn Learning

Accounting Foundations: Making Business Decisions Using IRR and NPV

via LinkedIn Learning

Overview

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Learn how to make long-term business decisions using net present value (NPV) and internal rate of return (IRR), including how to apply the foundations of the time value of money.

Syllabus

Introduction
  • Making informed business decisions
1. Time Value of Money and Risk-Adjusted Interest Rates
  • Understanding the time value of money
  • Time value of money: Applying these ideas
  • Overview of time value of money terms
  • Computing the time value of money
2. Discounted Cash Flow Analysis
  • Future cash flows and buying a car
  • Basic idea: Cash flows, timing, and risk
  • Risk and interest rates
  • Forecasting cash flows
  • Simple discounted cash flow valuation example
3. Capital Budgeting: NPV and IRR
  • Introducing capital budgeting
  • Capital budgeting overview
  • The internal rate of return (IRR)
  • Example: Buying a car in Hong Kong, changing forecasted cash flows
  • Example: Buying a doughnut machine
4. Practice: Cash Flows by Item or by Year?
  • Cash flows for Lily Company Machine
  • Calculate NPV and IRR
  • Spreadsheet analysis: Analyzing cash flows by item and year
5. Practice: Working Capital Plus Income Taxes
  • The opportunity cost of cash under the mattress
  • The time value cost of a working capital requirement
  • Income taxes: After-tax cash flows from revenues and expenses
  • Income taxes: The value of the depreciation tax shield
  • Computing NPV and IRR with all the complexities
  • Spreadsheet analysis: Sensitivity to changes in estimates
Conclusion
  • Capital budgeting helps structure your thinking

Taught by

Jim Stice and Kay Stice

Reviews

4.7 rating at LinkedIn Learning based on 514 ratings

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