Modified Internal Rate of Return

The modified internal rate of return (MIRR), like the internal rate of return (IRR) is a measure of the return of an investment.  MIRR assumes that all projects’ cash flows are reinvested at the cost of capital of the company, while the regular IRR assumes that the cash flows are reinvested at the IRR of […]

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Mid-Year Discounting

A DCF (Discounted Cash Flow) analysis measures the cash flow in terms of its present value. The method of discounting cash flow at the end of a projected year is applied with the following formula: *** QuickLaTeX cannot compile formula: \[ \dfrac {1} {(1+r) ^n} \] *** Error message: Cannot connect to QuickLaTeX server: cURL error 60: SSL certificate problem: unable to get local issuer certificate Please make sure your server/PHP settings allow HTTP requests to external resources ("allow_url_fopen", etc.) These links might help in finding solution: http://wordpress.org/extend/plugins/core-control/ http://wordpress.org/support/topic/an-unexpected-http-error-occurred-during-the-api-request-on-wordpress-3?replies=37 Where: = discount rate […]

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The Weighted Average Cost of Capital (WACC)

The weighted average cost of capital is defined as measuring the cost of capital where each category of capital is proportionally weighted and taken into consideration. Examples of some of the capital sources that are included in the calculation are; common stock, preferred stock, bonds and any other long-term debt. An increase in the weighted […]

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An Introduction to IRR and NPV

There are six key methods used to evaluate projects and decide whether the company should accept them: (1) net present value (NPV), (2) internal rate of return (IRR), (3) modified internal rate of return (MIRR), (4) profitability index (PI), (5) payback, and (6)discounted payback. Each will be explained and evaluated as follows. The most important […]

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An Introduction to Capital Budgeting

Capital Budgeting, broadly defined as a decision-making process that enables managers to evaluate and recognize projects that are valuable to the company, is usually the dominant mission facing any financial manager and his/her team. It is the most important task for managers for the following reasons. First, the strategic decisions and directions of a company, […]

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Porter’s Five Forces- Competitive Rivalry Among Existing Firms

Since its introduction in 1979, Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of […]

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Porter’s Five Forces- Bargaining Power of Suppliers

Since its introduction in 1979, Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of […]

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Porter’s Five Forces- Bargaining Power of Buyers

Since its introduction in 1979, Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of […]

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Porter’s Five Forces- Threat of Substitute Products or Services

Since its introduction in 1979, Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of […]

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Porter’s Five Forces- Threat of New Entrants

Since its introduction in 1979, Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of […]

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