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Chapter Outline:
"Economic Evaluation and Investment Decision Methods"
| Chapter
1: |
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Investment
Decision Making |
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Provides
a brief overview and introduction to a number of topics
developed in later chapters of the text. |
| Chapter
2: |
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Compound
Interest Formulas |
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Introduces
the reader to the basics of time value of money. |
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Different
methods for compounding interest and discounting future
cash flows are explored. |
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Proper
use of period and effective interest rates is also addressed. |
| Chapter
3: |
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Present,
Annual, and Future Value, Rate of Return and Break-Even
Analysis |
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Illustrates
the computation of rate of return, net present value and
ratios for evaluating income producing alternatives. |
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Graphical
illustrations present the meaning of selected decision
criteria. |
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Various
methodologies are presented to address the evaluation
of service producing alternatives, i.e. repair versus
replace, and lease versus purchase. |
| Chapter
4: |
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Mutually
Exclusive and Non-mutually Exclusive Project Analysis
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Addresses
the proper application of decision criteria to mutually
exclusive alternatives, such as develop versus sell, short
term (high grading) versus long term development scenarios,
heads up drilling versus farming out a property, etc. |
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Evaluation
of non-mutually exclusive alternatives such as experimental development drilling
or exploration prospects and maximizing value from limited
budget dollars. |
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Methodologies
are presented for handling cost-income-cost in a cash
flow stream and the "dual interest rates" that result.
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| Chapter
5: |
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Escalated
and Constant Dollars |
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Escalation
versus inflation. |
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The
proper application of the affects of inflation or deflation
is addressed in escalated dollar or constant dollar analyses.
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| Chapter
6: |
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Uncertainty
and Risk Analysis |
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Sensitivity
and risk analysis procedures illustrate how to address
uncertainty and probability of failure in evaluations.
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| Chapter
7: |
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Depreciation,
Depletion, Amortization and Cash Flow |
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Addresses
the specifics of computing after-tax cash flow in both
the resource and non-resource industries. |
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Topics
include what costs can be expensed, versus what costs
are capitalized and deducted by depreciation, depletion
or amortization. |
| Chapter
8: |
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Income
Tax, Cash Flow, Working Capital and Discounted Cash Flow
Aanalysis |
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Tax rates, write-offs, and tax credits. |
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Alternative
Minimum Tax. |
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Investor's
financial position and its effect on the economics of
projects. |
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Handling working capital in analyses |
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After-tax cashflow analysis of non-mineral projects and petroleum and mining production projects. |
| Chapter
9: |
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After
Tax Investment Decision Methods and Applications
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Calculation
of payback or payout. |
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Conversion
of operating cost savings into after-tax cash flow. |
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Handling
of sunk costs and opportunity costs is addressed and incorporated
into a number of breakeven calculation issues including
the determination of a projects breakeven before-tax selling
price or acquisition price. This involves the conversion
of after-tax NPV into its appropriate before-tax value. |
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Other
topics include a comparison of the discounted cash flow
methodology with some of the popular net income criteria
including return on capital or return on capital employed
and the concept of "value added" procedures. |
| Chapter
10: |
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After
Tax Service Analysis |
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Replacement
analysis. |
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Lease
versus purchase. |
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Proper
handling of sunk costs and opportunity costs in service analyses. |
| Chapter
11: |
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Evaluations
Involving Borrowing Money |
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Addresses
the use of borrowed money in both income and service evaluations. |
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Illustrates
how borrowed funds can influence the economic criteria
of a project. |
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Leverage purchases vs. lease |
| Chapter
12: |
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Personal
Investments |
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Personal
investment applications are presented including a long-term
investment philosophy related to stocks. |
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Investing
in options and futures contracts for speculative or hedging investment purposes. |
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Return
to the Bookstore
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