An alternative or complementary finance analysis tool - > IRR

An alternative to NPV is IRR - but be wary, it's not always as usefully revealing and can lead you astray.

Internal rate of return - Wikipedia, the free encyclopedia

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or simply the rate of return (ROR).[1] In the context of savings and loans the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors (e.g., the interest rate or inflation).

Internal rate of return - Wikipedia, the free encyclopedia

Because the internal rate of return is a rate quantity, it is an indicator of the efficiency, quality, or yield of an investment. This is in contrast with the net present value, which is an indicator of the value or magnitude of an investment.

An investment is considered acceptable if its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital. In a scenario where an investment is considered by a firm that has equity holders, this minimum rate is the cost of capital of the investment (which may be determined by the risk-adjusted cost of capital of alternative investments). This ensures that the investment is supported by equity holders since, in general, an investment whose IRR exceeds its cost of capital adds value for the company (i.e., it is profitable).

Internal Rate Of Return (IRR)

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.

IRR is sometimes referred to as "economic rate of return (ERR)".

It gets bandied about by Telstra and the mining lobby but what is it - > NPV

NPV has been bandied about in Australia quite a lot lately. It's been raised by both sides in the Resources Super Profit Tax debate and today by Telstra when putting a value on the sale of the copper and hybrid coax network to the NBN. In both instances the term has been misued to some degree, either by providing misleading information (the mining lobby) or insufficent detail (Telstra). So, just what is NPV?

Net present value - Wikipedia, the free encyclopedia

In finance, the net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.

The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputting a price; the converse process in DCF analysis, taking as input a sequence of cash flows and a price and inferring as output a discount rate (the discount rate which would yield the given price as NPV) is called the yield, and is more widely used in bond trading.

Net Present Value (NPV)

What Does Net Present Value - NPV Mean?
The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

How to calculate net present value (NPV) | eHow.com

Before I show you how to calculate the net present value or NPV, let me briefly explain what it is. Simply put, it's a way to decide whether or not to invest in a project by looking at the projected cash inflows and outflows.

MBA resouces - basic finance concepts

Doesn't look like it's been updated in a while but still an excellent site...

TeachMeFinance.com

TeachMeFinance.com

Contents

TeachMeFinance.com teaches you basic finance concepts.

* Time Value of Money - Present Value, Future Value
* Annuities - The Present Value of an Annuity
* Perpetuities - The Present Value of a Perpetuity
* Kinds of Interest Rates - Nominal Rate, Periodic Rate, Effective Annual Rate (EAR)
* Future Value of an Uneven Cash flow
* Probability Distribution - Expected Rate of Return (ERR)
* Standard Deviation
* CAPM - Beta
* Security Market Line
* Bond Valuation - Par Value, Coupon Payments, Indenture, Present Value of a Bond
* Stock Valuation - Preferred Stock, Common Stock, The Constant Growth Formula
* Cost of Capital- Cost of Retained Earnings, Cost of Common Stock, Cost of Prefered Stock, Cost of Bonds

Market cap means little unless you want to buy a stake... or boast about what you are "worth"

Apple, Microsoft and the Market Cap Myth | BNET Technology Blog | BNET

It seems that the press has found this week’s Next Big Topic: that Apple (AAPL) surpassed Microsoft in market cap. In the U.S., it’s now second only to Exxon (XOM). Microsoft CEO Steve Ballmer essentially dismissed market cap as a measure of importance.