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Question	Answer
Figure of Merit	It is a single number that estimates the economic value of the investment. Various ratios that analyze the attractiveness of an investment, including Return on Assets (ROA), Payback period, NPV, Internal Rate of Return.
Which figure of merit does not consider timing of cash flows?	Payback period and return on assets.
Present value?	Compounding: FV = PV * (1 +r)^n Discounting: PV = FV/(1 + r)^n
NPV	NPV = CF0 + CF1/(1+r)^1 + … + CF~/(1+r)^~
IRR	Is the discount rate that makes NPV = 0
What to value in order to rank investments?	It is better to use NPV as deciding factor.
Salvage Value?	SalePrice – TaxRate*(SalePrice – BookValue)
Terminal Value?	A.k.a Residual Value and is the present value of all cash flows that occur after the projected period (beyond T).
Inventory holding cost rate	Common rule of thumb is 25%
Cost Savings	inventory holding cost rate* inventory reduction

Supply Chain Finance II W5L2

	Created by Francisco Linhar about 9 years ago