Focus on programs or projects

Payback method

Time value of money

Net present value

·        Net present value of a tax shield and cash flow

·        Net present value analysis

Performance evaluation conflicts

The most common methods used to assess whether the firm should expend capital for machinery, replacement machinery, new plants, new products, or research are listed below:

• Accounting rate of return
• Equivalent annuity
• Internal rate of return
• Modified internal rate of return
• Net present value
• Payback period
• Profitability index
• Real options valuation

Reason´s for past trends in an investor´s decision where to invest, include the following:

·     change from fixed to floating exchange rates (starting mid-1970s)

·     shift in monetary policy, resulting in volatile interest rates (starting 1980s)

·     significant improvements in technology, which expanded the financial marketplace

·     increased globalization of both business and financial markets

  Off-balance sheet financing occurs when companies loan money to related parties rather than record a contractual agreement to borrow or lend money (Debt-financing).