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Investment Decision Module 7

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Robertas Kurakovas
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Risk Management
Valuation
Investment Decision
Financial Statements

Investment Decision Rules, Capital Budgeting

The case of Vertex Pharmaceuticals

Learning Objectives

NPV

The NPV Decision Rule

Time Value of Money

Time Value of Money - Discounting

The NPV Decision Rule - Again

Perpetuity

Growing Perpetuity

Using The NPV Rule

The NPV Decision Rule

The NPV Decision Rule- Concluding

Alternative Rules Versus the NPV Rule

Alternative Decision Rules

Internal Rate of Return ( IRR )

Choosing between projects

Monte Carlo Simulation

Exercise 1

Exercise 1 - Questions

Exercise 1 - Solution

Exercise 2

Exercise 2 - Solution

Exercise

Introduction to Financial Statements

Balance Sheet

Income Statement

Statement of Cash Flows

Financial Statement Analysis

Business Valuation

Cost Approach

Market Approach

Earning Multiples

(P/E) Ratio

EBIT

(P/B) Ratio

(P/S) Ratio

Market Approach Examples

Valuation by stage