Finance

Question 1

Trigger for NPV

Answer 1

If given multi-year analysis AND discount rate

include in incremental profits and costs, as this is cash flows in and out.

NPV = net cash flows for each year
then, discount = npv = (% , cf) + initial investmnet

Question 2

Payback

Answer 2

initial investment / net annual cash flows

Question 3

valuation

Answer 3

Apply the multiplier given to **after-tax net income to determine 100% of the value of company then compare to sale price to determine if reasonable