TITLE : ECONOMIC AND FINANCIAL ANALYSIS OF CAPITAL INVESTMENTS.

 
 
Chapter 1 Introduction 1
Nature and Scope of Economic Analysis  1
An Overview of the Book 3
 
Chapter 2 Interest and Interest Factors 5
Simple Interest 5
Compound Interest 6
Discrete Interest Factors 6
Effective and Nominal Interest 11
Interest Periods Other Than a Year 13
Continuous Interest Factors 14
Conversion of a Continuous Rate to an Equivalent Annual Rate 17
Continuous Payments and Funds-Flow Factors 17
Equivalence 19
Another Interest Factor 21
 
Chapter 3 Depreciation and Depreciation Models 27
Straight-Line Depreciation 28
Sum of the Years-Digits Depreciation 28
Declining-Balance Depreciation 29
Sinking-Fund Depreciation 33
Depreciation Based on Usage 34
Depletion 35
Capital Recovery with a Return  35
 
Chapter 4 Some Tax Considerations 38
Federal Taxes 38
State Income Taxes 52
Other Taxes 57
Economic Studies and Taxes 57
Taxes and Depreciation 58
Taxes and Interest 60
 
Chapter 5 Methods for the Evaluation of Projects 64
Net Cash Flow 64
Internal Rate of Return 71
Net Present Value 75
Relationship of IRR and NPV 80
Payback Period 80
 
Chapter 6 Minimum Acceptable Rate of Return and the Cost of Capital
          to the Firm 85
Cost of Debt Capital 86
Cost of Equity Capital 91
Cost of Preferred Stock 97
Weighted Cost of Capital 98
Cost of Depreciation 99
Estimating the Cost of Capital for a Company 101
Leverage 104
Cost of Capital and Minimum Attractive Rate of Return 105
 
Chapter 7 Minimum Annual Revenue Requirements and Cash Flow
          Definitions 110
The Basics of Minimum Annual Revenue Requirements  110
Cost of Capital and Definitions of Cash Flow 114
Summary 132
 
Chapter 8 Breakeven Analysis 136
Linear Breakeven Models 136
Multiproduct Analysis 144
Nonlinear Breakeven Analysis 150
Cash Flow and Profit 153
 
Chapter 9 Capital Budgeting 157
Mutually Exclusive Projects 158
The Basic Capital Budgeting Problem 165
Some Extensions to Formulating the Capital Budgeting Problem 166
Some Incorrect Proposals 170
A Digression on the Multiple Rate Problem 173
 
Chapter 10 Cost Comparisons 179
"Traditional" Approaches 179
Another Approach 184
Annual Costs 189
Lives of Assets 191
Comparison of Assets with Different Lives 201
Lease Versus Purchase 215
 
Chapter 11 Replacement Analysis 224
Other Tax Considerations 231
Replacement Analysis Extensions 233
Tax Considerations in the Determination of Annual Costs 239
Finite Need 243
 
Chapter 12 Some Risk Considerations in Cash Flow Models 248
Analytical Approaches 248
A Probabilistic C-V-P Model 260
Decision Trees 261
Simulation 263
A Final Point 267
 
Appendix A Interest Factors 274
Appendix B Internal Rate of Return 350
Appendix C Minimum Annual Revenue Requirements: Flow-through Method
354
Appendix D Minimum Annual Revenue Requirements: Normalizing Method 361
Appendix E Economic Useful Life 369
Appendix F Areas under the Normal Curve 375
Appendix G Unit Normal Loss Integral 380
 
Index 383