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Capital Budgeting MethodsCapital Budgeting Methods
AGEC 489-689AGEC 489-689
Spring 2010Spring 2010
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Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
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NPV > 0 suggests project is economically feasibleNPV = 0 suggests indifferenceNPV < 0 suggests project is economically infeasible
Page 69 in bookletPage 69 in bookletDiscount rate = 5%
Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
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EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
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EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
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I will come back to this table when we cover pro forma analysis and how to project the values in this table required in investment analysis.
I will come back to this table when we cover pro forma analysis and how to project the values in this table required in investment analysis.
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Set NPV equal to zero and solve for T, the terminal value.Set NPV equal to zero and solve for T, the terminal value.
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G is the expected rate of appreciation
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Equal net cash flows
Equal net cash flows
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Capital gainstax rate is 25%
Capital gainstax rate is 25%
Equal net cash flows
Equal net cash flows
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Capital gainstax rate is 25%
Capital gainstax rate is 25%
Comparableland values
Comparableland values
Equal net cash flows
Equal net cash flows
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Capital gainstax rate is 25%
Capital gainstax rate is 25%
7% land value appreciation rate
7% land value appreciation rate
Comparableland values
Comparableland values
Equal net cash flows
Equal net cash flows
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Capital gainstax rate is 25%
Capital gainstax rate is 25%
7% land value appreciation rate
7% land value appreciation rate
5% discount rate5% discount rate
Comparableland values
Comparableland values
Equal net cash flows
Equal net cash flows
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Capital gainstax rate is 25%
Capital gainstax rate is 25%
7% land value appreciation rate
7% land value appreciation rate
5% discount rate5% discount rate
Comparableland values
Comparableland values
Equal net cash flows
Equal net cash flows
20 year economic life
20 year economic life
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