Finance and
Accounting/Managerial
Accounting
Investment Analysis
Part 3
Topic outline
Investment Decisions
Budget
Investment Decisions
Robert and his wife would like to buy another coffee cart, with the following details.
Is this wise investment? Calculate the
o Payback period
o NPV
Note: both methods use the (yearly) cash flows, not the operating profit!
Cash flow = operating profit + depreciation
Depreciation
o (20.000 – 6.000) / 5 = 2.800
Yearly cash flows
o 1.350 + 2.800 = 4.150
NPV €653,25
Payback period in months 4,8
, Budgets
A budget is a business plan for the short term – typically one year – and is expressed
mainly in financial terms.