Expect a problem with multiple parts of calculating NPV, IRR, MIRR, Payback, Discounted Payback, Profitability Index of projects and making decisions.

Expect a problem with multiple parts of estimating cash flows of projects.

What is capital budgeting? What do you need to perform capital budgeting?

Know what each of the following project evaluation criteria is (i.e., what does each criterion tells us about the project being evaluated?): NPV, IRR, MIRR, Payback, Discounted Payback, Profitability Index.

Once you calculate NPV, IRR, MIRR, Payback, Discounted Payback, Profitability Index for a project, how would you make accept/reject decisions on the projects being evaluated.

If you are evaluating mutually exclusive projects with significantly different sizes, what kind of difficulty can arise in making decisions on projects when you use rate of return related criteria such as IRR, MIRR, and PI as the decision criteria? (To be able to answer this question, you need to know what independent projects are and what mutually exclusive projects are.)

If the projects have non-conventional or non-normal cash flows, what kind of difficulty can arise in making decisions on projects when you use IRR as the only decision criterion? Which two evaluation criteria will allow you to overcome this kind of difficulty and how? (To be able to answer this question, you need to know what non-conventional cash flows are.)

If you are evaluating mutually exclusive projects using IRR and NPV, what is the significance of the crossover rate? (To be able to answer this question, you need to know what crossover rate is.)

In estimating cash flows of projects, what does the initial cash outlay include? Make sure you explain if shipping costs and/or installation costs would be included in the initial cash outlay and why. Also make sure to explain what net working capital and change in net working capital measure.

In estimating cash flows of projects, one of the key information is depreciation methods to be used. What are the two depreciation methods used? How are they different?

Explain the process used to estimate operating cash flows. Explain how this process is different from income statement format.

Explain how the additional cash flow in the terminal year of the cash flow is estimated. Make sure to explain how after-tax salvage value is calculated.

Explain what each potential cash flow below is and if they should be included in the cash flows of the projects being evaluated. Using examples of those cash flows can be helpful. Explain why.: Opportunity costs, sunk costs, interest expenses, and externalities.