📘 Building Financial Acumen – Sessions 3 & 4

Topic: Investment Appraisal & Financial Decision-Making

Faculty: Prof. Debasish Maitra

� 1. Working Capital & Capital Investment

 Working Capital (WC):

Short-term capital invested in day-to-day operations (Current Assets – Current
Liabilities).
➤ At the start of each year → investment in WC
➤ At year-end → WC recovered (since it’s short-term).
 At project end: Total working capital is fully recovered, as there’s no period after
the project ends.

💰 2. Cash Flow in Capital Budgeting

Cash flow is determined by combining:

1. Operating Income (EBIT)

2. Add Depreciation (non-cash expense)
3. Adjust for Changes in Working Capital (ΔWC)
4. Subtract Capital Expenditure (CapEx)
5. Include Opportunity Cost (if applicable)

These represent Net Cash Flows (NCF) used for investment valuation.

⚙� 3. Net Present Value (NPV)

Definition:

NPV = Present Value (PV) of all future inflows − Present Value (PV) of all outflows.

Formula:
[
NPV = \sum \frac{CF_t}{(1 + r)^t} - I_0
]
Where:
  ( CF_t ) = Cash flow at time t
 ( r ) = Discount rate (cost of capital / hurdle rate)
 ( I_0 ) = Initial investment

Interpretation:

 NPV > 0 → Accept project (adds value to shareholders)

 NPV = 0 → Indifferent
 NPV < 0 → Reject project

Concept:

 Considers time value of money (TVM).

 Reflects risk-adjusted return via discount rate.

📉 4. Discounting Factor

 Represents risk or cost of capital (also called hurdle rate).

 Used to bring all cash flows to the same time frame (present value).
 Example:
If discount rate = 10% and cash flow = ₹100 in Year 1 → PV = 100 / (1+0.10) =
₹90.9

⚖� 5. Opportunity Cost

Definition:

The benefit foregone by choosing one alternative over another mutually exclusive one.

Example:
If a warehouse can be rented out for ₹1 lakh but is used for the company’s own operations,
the foregone rent is the opportunity cost.
👉 Hence, while evaluating the project, opportunity cost should be considered as a cost
(reduces NPV).

📈 6. Internal Rate of Return (IRR)

Definition:

IRR is the rate at which NPV = 0.

Formula (conceptual):
[
0 = \sum \frac{CF_t}{(1 + IRR)^t} - I_0
]

Interpretation:

 IRR = Project’s actual rate of return.

 If IRR > Cost of Capital → Accept the project.
 If IRR < Cost of Capital → Reject the project.

Excel Function: =IRR(values)

Select cash flows (including initial outflow as negative).

Example:
If IRR = 18% and Cost of Capital = 10%
→ Project is profitable until discount rate rises beyond 18%.
Beyond that → NPV becomes negative.

Key Insight:
IRR shows both –

1. Maximum tolerable discount rate, and

2. The project’s own rate of return.

🔍 7. Relationship Between NPV & IRR

Case NPV IRR vs Cost of Capital Decision

Positive > 0 IRR > Discount Rate Accept
Zero 0 IRR = Discount Rate Indifferent
Negative < 0 IRR < Discount Rate Reject

 Both NPV & IRR consider time value of money and risk-adjusted returns.
 More reliable than Payback Period or Accounting Rate of Return (ARR).

� 8. Sensitivity Analysis

Definition:

The study of how sensitive the project’s NPV/IRR is to changes in key assumptions like
discount rate, sales, or cost.

Purpose:
To test the robustness of the project under different scenarios.
Example:
If discount rate changes from 10% to 15%:

 Project S → NPV changes slightly (less sensitive)

 Project L → NPV drops sharply (more sensitive)

Hence, prefer projects that are less sensitive to external risk changes (more stable).

📊 9. Comparative Analysis

Project NPV IRR Sensitivity Decision

S (Small) Higher 23% Less Sensitive ✅ Better
L (Large) Lower 18% More Sensitive ❌ Riskier

📘 10. Key Financial Terms & Definitions

Term Definition / Meaning

EBIT Earnings Before Interest & Taxes
CapEx Capital Expenditure – investment in fixed assets
Working Capital Current Assets – Current Liabilities
Discount Rate / Hurdle Rate Minimum acceptable rate of return considering risk
Cash Flow (CF) Actual inflow or outflow of cash during a period
Depreciation Non-cash expense representing asset value reduction
Present Value (PV) Current worth of future cash flow discounted at rate r
Time Value of Money (TVM) ₹100 today > ₹100 tomorrow (because of earning potential)
Risk Adjustment Modifying returns or discount rate to reflect uncertainty
Sensitivity Degree to which NPV/IRR changes when assumptions vary

� 11. Formula Summary (Quick Reference)

Concept Formula
Net Cash Flow (NCF) EBIT + Depreciation – CapEx ± ΔWC – Opportunity Cost
NPV ( \sum \frac{CF_t}{(1 + r)^t} - I_0 )
IRR Rate where NPV = 0
PV Factor ( \frac{1}{(1 + r)^t} )
Decision Rule Accept if IRR > Cost of Capital

� 12. Exam-Oriented Key Takeaways

✅ NPV measures absolute value creation; IRR measures rate of return.
✅ Opportunity cost is always considered while evaluating investment.
✅ Sensitivity analysis helps evaluate risk tolerance.
✅ NPV & IRR both rely on Time Value of Money (TVM) concept.
✅ Payback & ARR are preliminary (non-discounting) methods.
✅ Always choose the project with higher NPV and lower sensitivity to risk.

Here’s a complete list of key financial formulas from the Building Financial Acumen
(Sessions 3 & 4) notes — neatly organized and exam-oriented 👇

📘 Key Financial Formulas – Investment Appraisal

� 1. Net Cash Flow (NCF)

[
\text{NCF} = \text{EBIT} + \text{Depreciation} - \text{CapEx} \pm \Delta \text{Working
Capital} - \text{Opportunity Cost}
]

📘 Where:

 EBIT = Earnings Before Interest & Taxes

 CapEx = Capital Expenditure (Fixed Investment)
 Δ Working Capital = Change in Current Assets − Change in Current Liabilities
 Opportunity Cost = Benefit foregone from the next best alternative

💰 2. Net Present Value (NPV)

[
\text{NPV} = \sum_{t=1}^{n} \frac{CF_t}{(1 + r)^t} - I_0
]

📘 Where:

 ( CF_t ) = Cash Flow in year t

 ( r ) = Discount rate / Cost of Capital / Hurdle Rate
 ( I_0 ) = Initial Investment

✅ Decision Rule:
  NPV > 0 → Accept project (adds value)
 NPV = 0 → Indifferent
 NPV < 0 → Reject project

� 3. Present Value (PV)

[
PV = \frac{FV}{(1 + r)^t}
]

📘 Where:

 FV = Future Value
 r = Discount Rate
 t = Number of Years

💡 Meaning: Present value of ₹100 received after 1 year at 10% = 100 / (1.1) = ₹90.9

📈 4. Present Value Factor (PVF)

[
PVF = \frac{1}{(1 + r)^t}
]
💡 Used to multiply with future cash flows to get their present value.

💹 5. Internal Rate of Return (IRR)

[
0 = \sum_{t=1}^{n} \frac{CF_t}{(1 + IRR)^t} - I_0
]

📘 Meaning: IRR is that rate of return which makes NPV = 0.

✅ Decision Rule:

 IRR > Cost of Capital → Accept

 IRR < Cost of Capital → Reject

📊 Excel Formula:
=IRR(range_of_cashflows)
⚖� 6. Profitability Index (PI)

[
PI = \frac{\text{PV of Inflows}}{\text{PV of Outflows}}
]

✅ Decision Rule:

 PI > 1 → Accept
 PI = 1 → Indifferent
 PI < 1 → Reject

� 7. Payback Period (PBP)

[
\text{PBP} = \frac{\text{Initial Investment}}{\text{Annual Cash Inflow}}
]

💡 Meaning: Time required to recover the initial investment.

✅ Decision Rule:
Shorter PBP = Better (faster recovery).

📘 8. Accounting Rate of Return (ARR)

[
ARR = \frac{\text{Average Annual Accounting Profit}}{\text{Average Investment}} \times
100
]

📘 Where:
Average Investment = (Initial Investment + Salvage Value) / 2

✅ Higher ARR = Better Project

📊 9. Sensitivity Analysis

There is no fixed formula, but the concept can be expressed as:

[
\text{Sensitivity} = \frac{%\ \text{Change in NPV}}{%\ \text{Change in Variable (e.g.,
Discount Rate)}}
]

💡 Interpretation:

 Higher sensitivity → Higher risk (NPV changes sharply with small changes in
assumptions).
 Lower sensitivity → Stable investment.

⚙� 10. Opportunity Cost

[
\text{Opportunity Cost} = \text{Return on Best Alternative Use of Resource} - \text{Return
on Current Use}
]

💡 Example:
Warehouse can earn ₹1,00,000 as rent but is used internally.
→ Opportunity Cost = ₹1,00,000 (to be deducted from benefits).

🔢 11. Time Value of Money (TVM)

[
FV = PV \times (1 + r)^t
]
[
PV = \frac{FV}{(1 + r)^t}
]

💡 Meaning:
Money today is worth more than the same amount in the future due to earning potential.

📉 12. Discounted Payback Period

[
\text{DPBP} = \text{Time taken for Cumulative Discounted Cash Inflows to equal Initial
Investment}
]

✅ Considers Time Value of Money unlike simple payback.

📘 Building Financial Acumen (वित्तीय समझ का विमाा ण)
Bilingual Case Study, Key Points, Definitions, and Example Statements

🎯 Core Concept (मूल अवधारणा)

Finance aims to create value for shareholders by balancing return and risk.
ववत्त का उद्दे श्य जोखिम और प्रविफल (Return) के बीच संिुलन बनाकर शेयरधारकों के वलए
मूल्य (Value) बनाना है।

⚖� Three Pillars of Financial Management (ववत्तीय प्रबंधन

के िीन स्तंभ)
Pillar / स्तंभ English Concept Hindi Meaning

1️⃣ Investment Selecting projects that maximize वििेश विणाय – ऐसे प्रोजे क्ट चुििा जो
Decision value अविकतम मू ल्य पैदा करें

2️⃣ Financing Choosing optimal mix of debt & वित्त पोषण विणाय – ऋण और इक्विटी का सही
Decision equity संतुलि चुििा

3️⃣ Dividend How profits are distributed to लाभां श विणाय – मु िाफे का वितरण कैसे वकया
Decision shareholders जाए

🏢 Case Study: Project Alpha vs. Project Beta

📋 Scenario / खथिवि

Company ABC Pvt. Ltd. plans to invest ₹1,00,000 in one of two projects:
Project Alpha and Project Beta.
Cost of Capital (WACC) = 10%, Project Life = 5 years, Tax = 30%

Particulars Alpha Beta

Initial Investment ₹1,00,000 ₹1,00,000

 Particulars Alpha Beta

Cash Inflows (Year 1–5) 20k, 25k, 30k, 35k, 40k 40k, 30k, 25k, 25k, 20k

� Financial Evaluation (ववत्तीय मूल्यांकन)

Method Formula Concept (अवधारणा)

Payback
Time to recover investment वििेश की िसूली में लगिे िाला समय
Period

(Avg. Profit ÷ Initial Investment) ×

ARR औसत लाभ प्रवतशत
100

शु द्ध ितामाि मू ल्य – समय मू ल्य को ध्याि में रखता

NPV Σ (CFt ÷ (1+r)ᵗ) – I₀
है

IRR Rate where NPV = 0 आं तररक प्रवतफल दर – जहााँ NPV शू न्य होता है

� Results (पररणाम)

Method Alpha Beta Better Option

Payback 4 years 4 years Same

ARR 10% 8.5% Alpha

NPV ₹10,125 ₹9,432 Alpha

IRR 13.5% 12.8% Alpha

✅ Final Choice: Project Alpha (because NPV & IRR are higher)

📈 Interpretation (व्याख्या)
English Statement वहं दी अिथ

The project with higher NPV adds more value to अविक NPV िाला प्रोजे क्ट शे यरिारकों के वलए अविक
shareholders. मू ल्य जोड़ता है ।
 English Statement वहं दी अिथ

IRR greater than WACC means the project is

यवद IRR WACC से अविक है तो प्रोजे क्ट लाभदायक है ।
financially viable.

Payback Period shows liquidity, but not

Payback अिवि तरलता वदखाती है , पर लाभप्रदता िहीं।
profitability.

ARR ignores the time value of money. ARR िि के समय मू ल्य को िहीं मािता।

NPV method is superior as it considers time NPV विवि श्रे ष्ठ है क्ोंवक यह समय और जोक्वखम दोिों को
value and risk. ध्याि में रखती है ।

� Formulas Summary (सूत्र सारांश)

Concept Formula Meaning (अिथ)

NPV ( \sum \frac{CF_t}{(1+r)^t} - I_0 ) Net Present Value

IRR NPV = 0 Internal Rate of Return

ARR ( \frac{Avg. Profit}{Initial Investment} × 100 ) Accounting Rate of Return

Payback Period ( \frac{Investment}{Annual Cash Inflow} ) Recovery Time

WACC ( \frac{E}{V}k_e + \frac{D}{V}k_d(1 - T) ) Weighted Average Cost of Capital

📊 Conceptual Insights (वैचाररक अंिर्दथवि)

English Concept Hindi Explanation

Shareholder Value जब ररटिा पूंजी की लागत (Cost of Capital) से अविक होता है , तब कंपिी मू ल्य
Creation बिाती है ।

Risk-Adjusted Return जोक्वखम को ध्याि में रखकर वमलिे िाला िास्तविक प्रवतफल।

Opportunity Cost अगले सिोत्तम विकल्प से वमलिे िाला छोड़ा हुआ लाभ।

Capital Structure कंपिी के पूंजी स्रोत – ऋण और इक्विटी का अिु पात।

Time Value of Money

आज का ₹1, भविष्य के ₹1 से अविक मू ल्यिाि है ।
(TVM)
📘 Exam-Ready Concept Statements (परीक्षा हे िु मुख्य
किन)
Statement (English) वहं दी अनु वाद

1️⃣ For a project to have more than one IRR, यवद वकसी प्रोजे क्ट में एक से अविक IRR हैं , तो दोिों IRR
both IRRs must be greater than the WACC. WACC से अविक होिे चावहए।

2️⃣ NPV and IRR may give conflicting results जब दो प्रोजे क्ट परस्पर अिन्य (Mutually Exclusive) हों,
when projects are mutually exclusive. तब NPV और IRR के पररणाम वभन्न हो सकते हैं ।

3️⃣ A project should be accepted if its NPV is यवद NPV ििात्मक (Positive) है तो प्रोजे क्ट स्वीकार
positive. करिा चावहए।

4️⃣ When IRR < WACC, the project destroys जब IRR WACC से कम होता है , तो यह शे यरिारक मू ल्य
shareholder value. को घटाता है ।

5️⃣ WACC acts as the minimum required return WACC न्यू ितम अपेवित प्रवतफल या बािा दर (Hurdle
or hurdle rate. Rate) के रूप में काया करता है ।

6️⃣ Payback period focuses on liquidity, not Payback अिवि तरलता पर ध्याि दे ती है , लाभप्रदता पर
profitability. िहीं।

7️⃣ Depreciation is a non-cash expense added मू ल्यह्रास (Depreciation) िकद रवहत व्यय है वजसे मु क्त
back to free cash flow. िकदी प्रिाह (Free Cash Flow) में जोड़ा जाता है ।

8️⃣ Cost of Equity represents the expected इक्विटी की लागत िह प्रवतफल है जो शे यरिारक अपेिा
return by shareholders. करते हैं ।

9️⃣ Opportunity Cost must be included in अिसर लागत को वििेश मू ल्यां कि में शावमल करिा
investment appraisal. आिश्यक है ।

🔟 NPV gives absolute value, while IRR gives NPV पूणा मू ल्य वदखाता है जबवक IRR प्रवतशत प्रवतफल
percentage return. दशाा ता है ।

� Learning Outcomes (सीि का सारांश)

✅ Understand how financial metrics like NPV, IRR, ARR, and Payback guide decisions.
✅ Appreciate that profit ≠ value — true goal is shareholder value creation.
✅ Learn to compare projects using risk-adjusted returns.
✅ Apply TVM (Time Value of Money) in decision-making.
✅ Recognize the importance of cost of capital in evaluating investments.
📘 Building Financial Acumen (वित्तीय समझ का विमाा ण)
Bilingual Exam Notes | Definitions | Key Concepts | Formulas | Statements

🎯 Objective (उद्दे श्य)

To understand how organizations create value for shareholders by balancing Return and
Risk.
संगठि कैसे जोखिम (Risk) और प्रविफल (Return) के बीच संतुलि बिाकर शेयरिारकों के वलए
मूल्य (Value) पैदा करते हैं ।

⚖� Three Key Decisions in Financial Management

(ववत्तीय प्रबंधन के िीन प्रमुि वनणथय)
Decision English Explanation वहं दी अिथ

1�⃣ Investment Which projects to invest in to create वकस प्रोजे क्ट में वििेश करिा है तावक
Decision maximum value अविकतम मू ल्य उत्पन्न हो

2�⃣ Financing What is the best combination of debt ऋण और इक्विटी का सही संयोजि क्ा होिा
Decision and equity चावहए

3�⃣ Dividend How profits should be distributed or लाभां श का वितरण या पुिविा िेश कैसे वकया
Decision retained जाए

💰 1. Investment Decisions (वनवेश वनणथय)

📘 Definition (पररभाषा)

Selecting long-term projects that maximize the firm’s value.

ऐसे दीघाकावलक वििेश चुििा जो कंपिी के मूल्य में िृक्वद्ध करें ।

� Capital Budgeting Techniques (पूंजी बजट िकनीकें)

 Category Methods Explanation (व्याख्या)

Without Time Value - Payback Period- Accounting Rate of Return सरल विवियााँ , पर समय के मू ल्य
of Money (ARR) को िहीं माितीं

With Time Value of - Net Present Value (NPV)- Internal Rate of समय और जोक्वखम दोिों को
Money Return (IRR)- Profitability Index (PI) ध्याि में रखती हैं

� Key Formulas (मुख्य सूत्र)

Concept Formula Explanation

Payback समय वजसमें वििेश िसूल

( \text{Investment} ÷ \text{Annual Cash Inflow} )
Period होता है

( \frac{\text{Average Profit}}{\text{Initial Investment}} ×

ARR औसत प्रवतफल दर
100 )

NPV ( \sum \frac{CF_t}{(1 + r)^t} - I_0 ) समय मू ल्य सवहत लाभ

IRR Rate where NPV = 0 िह दर जहााँ NPV शू न्य होता है

💸 2. Financing Decisions (ववत्त पोषण वनणथय)

📘 Definition

Deciding the optimal mix of debt and equity to finance assets.

पररसंपवत्तयों को वित्तपोवषत करिे के वलए ऋण और इक्विटी का सिोत्तम अिुपात तय करिा।

📊 Key Concepts (मुख्य अवधारणाएँ )

Concept English Meaning वहं दी अिथ

Capital
Mix of debt and equity पूंजी संरचिा – ऋण और इक्विटी का अिु पात
Structure

Use of fixed cost capital (debt) to magnify स्थायी लागत पूंजी (ऋण) का प्रयोग करके
Leverage
returns लाभ बढािा

Cost of Capital
Minimum required rate of return न्यू ितम अपेवित प्रवतफल दर
(k)
� Weighted Average Cost of Capital (WACC)

[
WACC = \frac{E}{V}k_e + \frac{D}{V}k_d(1 - T)
]

Symbol Meaning

E Market value of Equity

D Market value of Debt

V Total capital (E + D)

ke Cost of Equity

kd Cost of Debt

T Tax rate

✅ Rule: Lower WACC → Higher Firm Value.

💡 Cost of Capital acts as a “Benchmark” or Hurdle Rate.

💵 3. Dividend Decision (लाभांश वनणथय)

📘 Definition

Decision regarding the distribution of profits between shareholders and reinvestment.

यह विणाय वक लाभ का वकतिा वहस्सा शेयरिारकों को वदया जाए और वकतिा पुिः वििेश वकया जाए।

📊 Types of Dividend Policies (लाभांश नीवियों के प्रकार)

Policy Description वहं दी में व्याख्या

Stable Dividend Fixed amount every year हर िषा स्थायी रावश

Constant Payout
Fixed percentage of profit लाभ का विवित प्रवतशत
Ratio

Dividend only after financing new िए प्रोजे क्ट वित्तपोषण के बाद शे ष

Residual Policy
projects लाभां श
📈 Risk and Return (जोखिम और प्रविफल)
Concept English Meaning वहं दी अिथ

Return Reward for bearing risk जोक्वखम उठािे का प्रवतफल

Risk Uncertainty in expected returns अपेवित लाभ में अविवितता

Relationship Higher risk → Higher return वजतिा अविक जोक्वखम, उतिा अविक प्रवतफल

If Return > Cost of Capital → Value Creation

If Return < Cost of Capital → Value Destruction
(यवद प्रवतफल पूंजी लागत से अविक है तो मूल्य सृजि होता है , अन्यथा मूल्य िष्ट होता है )

� Time Value of Money (धन का समय मूल्य)

“A rupee today is worth more than a rupee tomorrow.”
“आज का ₹1 कल के ₹1 से अविक मूल्यिाि है ।”

📘 Formulas

[
PV = \frac{FV}{(1 + r)^t} \quad \text{and} \quad FV = PV(1 + r)^t
]

Term Meaning (अिथ)

PV Present Value (ितामाि मू ल्य)

FV Future Value (भविष्य मू ल्य)

r Rate of Return (प्रवतफल दर)

t Time (समय)

💼 Cash Flow Components (नकदी प्रवाह के घटक)

[
CF = [EBIT(1 - Tax)] + Depreciation - \Delta WC - CapEx
]
 Term Full Form Hindi Meaning

EBIT Earnings Before Interest & Tax ब्याज और कर से पहले की आय

ΔWC Change in Working Capital कायाशील पूंजी में पररिताि

CapEx Capital Expenditure पूंजीगत व्यय

Depreciation Non-cash expense added back िकद रवहत व्यय वजसे जोड़ा जाता है

📘 Types of Risks (जोखिम के प्रकार)

Type English Meaning वहं दी अिथ

Operational Risk Due to internal operations संचालिगत जोक्वखम

Financial Risk Due to debt and capital structure वित्तीय जोक्वखम

Market Risk Due to market changes बाजार से जु ड़ा जोक्वखम

💡 Important Concepts & Terms (महत्वपूणथ अवधारणाएँ )

Term Definition (पररभाषा)

Shareholder Value Total wealth created for shareholders.

Opportunity Cost Benefit foregone by choosing one option over another.

Cost of Capital Minimum return expected by investors.

Mutually Exclusive Projects Acceptance of one excludes others.

Accept-Reject Decision Evaluating a single investment option.

📘 Conceptual Statements for Exams (परीक्षा हे िु महत्वपूणथ

किन)
Statement (English) वहं दी अनु वाद

1️⃣ For a project to have more than one IRR, both यवद वकसी प्रोजे क्ट में एक से अविक IRR हैं , तो दोिों
IRRs must be greater than the WACC. IRR WACC से अविक होिे चावहए।
 Statement (English) वहं दी अनु वाद

2️⃣ NPV and IRR may give conflicting results when जब दो प्रोजे क्ट परस्पर अिन्य हों, तब NPV और IRR
projects are mutually exclusive. के पररणाम अलग-अलग हो सकते हैं ।

3️⃣ A project should be accepted if its NPV is यवद NPV ििात्मक है तो प्रोजे क्ट स्वीकार करिा
positive. चावहए।

4️⃣ When IRR < WACC, the project destroys जब IRR WACC से कम होता है , तो प्रोजे क्ट
shareholder value. शे यरिारक मू ल्य को घटाता है ।

5️⃣ WACC acts as the hurdle rate or minimum WACC बािा दर या न्यू ितम अपेवित प्रवतफल के
required return. रूप में काया करता है ।

6️⃣ Payback period focuses on liquidity, not Payback अिवि तरलता पर ध्याि दे ती है , लाभप्रदता
profitability. पर िहीं।

7️⃣ ARR ignores the time value of money. ARR िि के समय मू ल्य को िहीं मािता।

8️⃣ Depreciation is a non-cash expense added back मू ल्यह्रास िकद रवहत व्यय है वजसे िकदी प्रिाह में
to cash flow. जोड़ा जाता है ।

9️⃣ Cost of Equity represents the return expected इक्विटी की लागत िह प्रवतफल है जो शे यरिारक
by shareholders. अपेिा करते हैं ।

🔟 NPV gives absolute value, while IRR gives NPV पूणा मू ल्य वदखाता है जबवक IRR प्रवतशत
percentage return. प्रवतफल वदखाता है ।

� Summary Chart (सारांश िावलका)

Concept Focus Formula / Relation

Investment Project Evaluation NPV, IRR, Payback, ARR

Financing Debt-Equity Mix WACC, Cost of Capital

Dividend Profit Distribution Stable / Residual Policy

Risk–Return Value Creation Return vs Cost of Capital

Time Value Future Value Discounting PV = FV / (1+r)ᵗ

� Learning Outcomes (सीि का सारांश)

✅ Apply financial evaluation tools (NPV, IRR, ARR, Payback).
✅ Understand capital structure and WACC.
✅ Recognize relationship between risk, return, and value creation.
✅ Apply Time Value of Money (TVM) in decision-making.
✅ Develop financial acumen for strategic business decisions.