BTS830 Lecture 5

Financial methodologies are rooted in traditional “captital budgetting decisions”
long term & depreciable
- machinery facilities, IT and management expertise

Breakeven analysis
- comparison of quanitiable costs and non quantifiable benefits

Steps
1.calulate value of costs
2.calculate value of quantifiable benefits
3.calculate Net Present Value of costs/benefits
4.determine non-quantifiable benefits and subjectively consider them in the analysis


Payback Period Methodology
- every payback period has a cutoff period (it ends in X years)

Accounting Rate of Return (book rate of return) : book value=cost-depreciation
- memorize the ARR calc