WHAT TO DISCOUNT

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WHAT TO DISCOUNT
1.Only cash flow is relevant. 2. Estimate
incremental (after tax) cash flows. 3. Be
consistent in treatment of inflation. 4.
Recognize project interactions.
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MIRR 16.5
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Crossover Point 8.7
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1. Estimate the Cash flows. 2. Assess the
riskiness of the cash flows. 3. Determine the
appropriate discount rate. 4. Find the PV of the
expected cash flows. 5. Accept the project if PV
of inflows gt costs Definitions Independent
versus mutually exclusive projects. Normal
versus nonnormal projects.
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Project L
If the projects are independent, accept both
projects. If the projects are mutually
exclusive, accept Project S since PISgtPIL.