Why is investment appraisal methods such as NPV, IRR and ROI gaining popularity?
115311
They're not gaining in popularity.  They have always been used.  NPV is the best and most informative investment analysis method to use.  If you calculate the inputs properly (such as the firm's cost of capital) it is the most accurate method to use to evaluate various investment alternatives.\nA firm should Always choose projects that generate a positive NPV.\nIRR isn't such a great measure because of its biggest assumption, which is that the cash flows generated by the project can be reinvested at the IRR, which is a very unrealistic assumption to make.
459436
Maybe look into GASB34.  It's an accounting standard for government.  It is causing a lot of uproar because of what it means for asset management.  Hot topic right now.
117180
The internal rate of return (IRR) is a way to measure the return on an investment. The formal definition can be found here at wikipedia:\nhttp://en.wikipedia.org/wiki/Internal_rate_of_return\n\nIt is simply a method used to compare different investment scenarios. As different alternatives may involve different sums of money paid at different points in time, it may be difficult to objectively compare them. The IRR simply produces a single number for each alternative, and the one with the highest IRR is chosen as the best one.\n\nWhat it basically measures is the amount of interest that a bank account would have to pay in order to attain the same cash payments.\n\nSome simple examples:\n\nFor instance, if you were to pay $100, and then receive $110 back 1 year later, the IRR is 10%.\n\nIf you were to pay $100, then receive $10 back one year later, and then $110 one year after that (two years after the beginning), then the IRR is still 10%.\n\nIn general, the IRR is difficult to solve, and must use iterative numerical methods for its solution.\n\nThere are also known problems with IRR that make its usefulness somewhat limited.\n\nLet's just say that you had a situation where you received $110 dollars now, and only had to pay $100 one year from now. If you work through the numbers, you would find the IRR to be -10% (note the MINUS).\n\nIf instead you received $100 now and had to pay back $100 one year from now, the IRR would be 0%.\n\nNow we can see the problem - clearly the first alternative is favourable, you receive more money UP FRONT than you even need to pay in. Unfortunately, IRR messes up in these kinds of cases and gives you a misleading result.
1116982
Sometimes stocks are undervalued for a reason and the reason is not readily apparent to someone not in the know.  Other times stocks become undervalued because the market in general is undervalued.  In todays market some stocks in the later category might be found. But there is the possibility that the world is heading into a recession and these stocks may become much more undervalued next year. \n\nThe PEG ratio is often used to try to uncover undervalued stocks. That is the ratio of PE to growth rate.  In theory the lower the ratio the more undervalued the stock.  Warren Buffet likes companies that have potential that has not been realized. That implies poor management. He is in a position to take over the company and change the management.  You perhaps are not. \n\nI ran a screen on Yahoo of companies paying 3% to 5% dividend with a PEG between .5 and 1.0 and a market capitalization of greater than a billion dollars.  21 companies were selected.  Quite a few of them large banks.  Perhaps what you are looking for is among those selected.
1011312
The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. In other words, the risk-return tradeoff says that invested money can render higher profits only if it is subject to the possibility of being lost.  \n\nBecause of the risk-return tradeoff, you must be aware of your personal risk tolerance when choosing investments for your portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make money, you can't cut out all risk. The goal instead is to find an appropriate balance - one that generates some profit, but still allows you to sleep at night.
806395
first u have to know why the mutual funds is for --- since in shares the risk is high so they go for the mutual fund where there are number of sectors that are being part of the fund like IT,Medical etc.,  the main target audience for the mutual fund is that Middle cluase people since they love to invest but they have fear that how that perform in the market so they introduced the mutual fund........\n\nthe mutual fund is marked by the NAV (Net Asset Value)\n\nand the initial public offer is Rs 10. no matter which company belong to the fund.....\n\nand now they call it as NFO\n\n\n\ninvest  in the mutual fund and let the money will earn to you........\n\n\nremember there are many types of investment are there like SIP
233923
Part of the reason for the attraction for provision accounting is that it helps income smoothing, ie in good years, you can provide for a rainy day so to speak....\n\nThe new accounting standards - I'm taking it that you are talking about IFRS is more balance sheet oriented, so the provision has to justify itself as either as an asset or liability - and if it fails that gets caught into the income statement.\n\nFrom an analysts perspective, provisions need to be stripped off to understand the inherent core profitability of the firm. So in a sense I like the direction the new accounting standards are moving.\n\nYou can read more about income smoothing in a good forensic accounting book or the book titled "Financial Shenanigans"
241899
Totally disagree with taran goyal. Valuation of a mutual fund's NAV never depends on what's happening in the holding company but on what's happening in those companies/sectors where the mutual fund has made its investments.\n\nAtleast 10 of Reliance MF schemes are doing very well, top ones being Diversified power sector, growth, equity opportunities, media & entertainment, vision, index sensex and pharma. Then the newly launched Equity fund NFO has been the most successful NFO of all time in India in terms of highest collections during NFO period (Rs. 5000 crores).\n\nThe AMC is using some experienced brains out there.. See if you can use yours :)
962248
Return on investment (ROI) is a standard measurement ratio used to find the relative attractiveness of various avenues of investment. The return is calculated on Compound Interest. \nCredit card interest rates should be calculated on Compound interest basis.
823264
This sounds unfavorable, simply because it is too good to be true. \n\n\nFirst. Your math is a bit suspect.  IRR is the discount rate so that the NPV equals the future cash flows.  16% return over 7 years equalling 3.6m and 5.4m at 9%, but you're getting it for 4.6m which indicats an IRR somewhere in the teens. \n\nSecondly, the IRR seems to high for a power plant.  Typically, Independent Power Producers tend to have take-or-pay cost-plus contracts with low yields (roughly 3-5%). Since cost-plus takes out most of the operating risk, it is low return (but can be enhanced through leverage).  Your IRR is basically "too good to be true", which makes me think that the contract is not cost-plus (e.g. pre-schedule pricing with a mismatch in revenues/costs where you bear price risk on fuel) or is in a situation where there are other mitigating factors (e.g. unstable government, lack of reliable legal system). \n\nIf it is not cost-plus, you will need to hedge away price risk on your fuel.  Since futures contracts don't go out 7 years, let alone 21, you would need to secure in deliverable forwards - or preferrably in actually buying a fuel (e.g. coal commitment, natural gas line) due to default risk. \n\nAlso, how do you plan on exiting this investment unless you structure a put in the equity injection?
38219
For single independent projects both will lead to the same answer with respect to acceptance or rejection. However, for mutually exclusive projects they give contradictory results. In that case the project with higher NPV rather than higher IRR should be preferred
298854
Commercial property is on the rise. Anything to do with retail is on a current sell out. Even investments in commercial property is rising very well. If youre in Rajasthan, the place is supposed to pick up rapidly for the IT and BPOs. Also, manufacturing in Rajasthan is on a rise. Contact some architects there. Or get in touch with a Civil Engineering/Construction firm immediately.
570334
inquire-- that is just a question! If you are looking to acquire investment property the process is about the same as any purchase. Depending on credit, capacity, and the collateral every purchase is different. Your appraisal will have to have a rental page filled out and you will be required a much larger down payment as well as reserves. The application must show as investment property rather than owner occupied intentions. Many first time investors will buy the home as owner occupied and place their current residence into the rental market so they get better pricing on the mortgage. That is assuming you are not paying cash for the new purchase. \nGood luck to you!
1051260
If each cash flow is subject to a binomial distribution (i.e. 60000 w/ a prob of 90%, and $0 otherwise) the the expected cash flow vector is the dot product of the $$$ & the probability vector.\n\nAssuming the investor is risk averse, the certainty equivalent NPV is simply the NPV of the expected cash flow vector discounted at the RFR.  The answer is b (w/ some rounding- I got $18701).\n\nIf you can't assume the binomial distribution or risk aversion, then the answer is d.
336100
I am assuming you are referring to the purchase of the underlying equity by a larger, more established company. The reason for this could be two-fold. There could be restrictions in place regarding the institutional ownership of the stock and subsequent purchases made there-in. Another reason, and more likely, is the fact of liquidity. Garnering a large number of shares of an illiquid stock could single-handedly manipulate the given equity leading to SEC investigations and such. And by investing in stages (known predominatly as "scaling into a position", they could evaluate on the go. For instance, the company that is being bought could have some current hindrances surrounding it. By scaling in, you can watch as some of the shady situations resolve themselves and you become more comfortable with the current share price.
460300
There are probably some small firms specializing in it.\nBut they do only standard valuation. (ie do not get involved in your business situation, just make an estimate based on your historical numbers, without using any valuation method).\n\nI could do a valuation for free as I'm a recent graduate in financial engineering and used to do lots of different valuations either stock-exchange listed or nonlisted companies. There are some 5-6 methods.\n\nSomething you could do on your own is to use comparables. IE compare your business to other similar businessess. If that doesn't help mail me.
1056235
The name alone tells me that it is probably another BS multilevel marketing scheme, designed to make money by selling books, memberships, training, etc. to people like you.\n\nAnyone who claims to have a "proven system" for generating wealth is usually full of s**t.