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Monday, August 11, 2008


Missed last week's lecture but oh well. Going into investment timing where the value of what you want to buy is changing over a period.

Comparing investments of unequal periods: Find the lowest common multiple between the periods so that you are comparing fairly, or change the cash flow stream into an eqivalent annual annuity, or calculate the profitability index when capital is limited. Capital rationing for setting limits on funds for an investment.

New module: cash flows. Incremental: indirect efforts, sunk costs, opportunity costs, investment in working capital, overhead costs, ignore financing flows.

Calculating cash flow: investment from fixed assets (initial/salvage) + investment from working capital (accounts receivables/inventory) + from operations (revenue - cash expenses - taxes paid).

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