INTERNAL RATE OF RETURN TECHNIQUE
This technique is also called trial and error method.hurdle rate (H.R)
Decision Rules:
IRR>H.R accepted
IRR=0 accepted
IRR<H.R rejected
According to this method those projects are accepted whose IRR is greater than H.R or equal to H.R and those projects are rejected whose IRR is less than H.R.
short cut formula:
IRR =ii + (ih-il)(Pvl - Pvirr) / Pvl - Pvh
il= low interest rate
ih= high interest rate
Pvl = present low interest rate
Pvh= present value high interest rate
Pvirr = internal rate of return
Capital Ratio Index method
compay have total budget =100000suppose
No of project IRR Initial Cost
A 25% 40000
B 22% 20000
C 20% 30000
D 18% 20000
E 16% 10000
In capital ratio the company select those project from the ranking projects which come under the budget of the company and they combination give the maximum return.
FINANCIAL MANAGEMENT
DECISION AREA OF FINANCIAL MANAGEMENT
AGENCY PROBLEM
TYPES OF BUSINESS
FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES
TYPES OF FINANCIAL MARKETS
TIME VALUE OF MONEY
EXAMPLES AND FORMULA TIME VALUE OF MONEY
CASH FLOW,SUM,SERIES OF CASH, ANNUITY AND MIX STREAM
ANNUITY TYPES AND FORMULA
AMORTIZATION SCHEDULE OR TABLE WITH EXAMPLE
EFFECTIVE INTEREST RATE WITH EXAMPLE
VALUATION OF LONG TERM SECURITIES (BONDS)
TYPES OF BONDS
BONDS FORMULA,ZERO COUPON PERPETUAL
VALUATION OF LONG TERM SECURITIES (SHARE)
CASH AND MARKETABLE SECURITIES MANAGEMENT
MANAGING CASH INFLOW AND OUTFLOW
SECURITIES MANAGEMENT
SHORT TERM FINANCING
SPONTANEOUS LABILITIES
NEGOTIATED FINANCE
CAPITAL BUDGETING
CAPITAL BUDGETING TECHNIQUE
NET PRESENT VALUE TECHNIQUE
INTERNAL RATE OF RETURN TECHNIQUE
ACCOUNT RECEIVABLE MANAGEMENT
INVENTORY MANAGEMENT
FORCASTING
MBA NOTES FINANCIAL MANAGEMENT
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