Scribd
Upload
15 views42 pages

Chapter 7 Ror Analysis For A Single Alternative

The document discusses the financial implications of a car lease, including downpayments and annual payments based on interest rates. It distinguishes between conventional and nonconventional cash flow series, highlighting the complexities of cash flows that change signs multiple times. Additionally, it notes that certain projects may incur significant costs at the end of their life cycle, affecting cash flow patterns.

Uploaded by

Najam Ul Qadir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
15 views42 pages

Chapter 7 Ror Analysis For A Single Alternative

The document discusses the financial implications of a car lease, including downpayments and annual payments based on interest rates. It distinguishes between conventional and nonconventional cash flow series, highlighting the complexities of cash flows that change signs multiple times. Additionally, it notes that certain projects may incur significant costs at the end of their life cycle, affecting cash flow patterns.

Uploaded by

Najam Ul Qadir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 42

315.47 x 4 = 1000 + 261.

88
315.47 x 4 = 400 + 861.88
A downpayment of PKR “A” for a car lease will require the
customer to pay PKR “B” per year for “N” years, at which the
estimated sale price of the car will be PKR “X”. If the bank’s
STATED interest rate is “Z%” per year, should the customer
go for the car lease??
To cut down calculation time, numerical techniques can also
be used to compute i*
(Uniformize the gradients)
(Initial guess for numerical techniques)
• In the cash flow series presented thus far, the algebraic signs on the net cash
flows changed only once, usually from minus in year 0 to plus at some time
during the series. This is called a conventional (or simple) cash flow series.
• However, for some series the net cash flows switch between positive and
negative from one year to another, so there is more than one sign change. Such
a series is called nonconventional (realistic).
• As shown in the examples of Table 7–3 , each series of positive or negative
signs may be one or more in length.
• Relatively large net cash flow (NCF) changes in amount and sign can occur in
projects that require significant spending at the end of the expected life.
• Nuclear plants, open-pit mines, petroleum well sites, refi neries, and the like
often require environmental restoration, waste disposal, and other expensive
phaseout costs. The cash flow diagram will appear similar to Figure 7–5 (a).
• Plants and systems that have anticipated major refurbishment costs or upgrade
investments in future years may have considerable swings in cash flow and
sign changes over the years, as shown by the pattern in Figure 7–5 (b) .

You might also like