focus on future cash benefit

free cash flow   inflation and taxation

captial constructure   Mixture of capita 

duration   == test on resk    sooner the better to catch the investment back

NPV decision rule:

only accept project with positive NPV at cost of capital

procedure to forecast free cashflow:

1. revenues

2. cost   

3.  investment

4. disposal revenue

5. discount rate  = interest rate, inflation, taxation 

real  (current) not adjusted for inflation  ---discounted in realtate of the capital

norminal 

(1+i) = (1+r)*(1+h)

i  nominal rate of reture

r  real rate of reture

h inflation 

IRR  decision rules

the project should be accepted if the IRR is greater than the cost of capital (required reture of return)

assumption:

1. liner relationship 

2. two or more IRR   patern of the cashflow

MIRR   overcome the shortage (limitations) of IRR 

1. unique MIRR

2. provide accural reture of capital

3. provide a simle percentage easy to 

decision rule: 

MIRR > cost of capital

capital rational model: to solve the shortage of money problem in multi-project selection