Page 69 - FM Integrated WorkBook STUDENT 2018-19

Chapter 4

Investment appraisal – Further aspects

of discounted cash flows

Outcome

By the end of this session you should be able to:

 explain the impact of inflation on interest rates and define and distinguish
between real and nominal (money) rates

 explain the difference between the real terms and nominal terms approaches to
investment appraisal

 use the nominal (money) terms approach to appraise an investment

 use the real terms approach to appraise an investment

 explain the impact of tax on DCF appraisals

 calculate the tax cash flows associated with tax-allowable depreciation and
incorporate them into net present value (NPV) calculations

 calculate the tax cash flows associated with taxable profits and incorporate
them into NPV calculations

 explain the impact of working capital on an NPV calculation and incorporate
working capital flows into NPV calculations

and answer questions relating to these areas.

The underpinning detail for this Chapter in your Integrated Workbook can
be found in Chapter 4 of your Study Text

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