Join Rudolph Rosenberg for an in-depth discussion in this video Risk assessment, part of Making Investment Decisions.
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…Once you have determined the rate that you want…to beat, you can already compute the NPV calculation.…If the result is negative, then there is no point in going further, since…this project will make less money that the next best option available to you.…If on the contrary, the NPV is equal to zero…or is positive, that means it could make more money.…The question then revolves around the risk associated with the project.…If the…NPV is equal to zero, that means that the project…will make just as much money as the next best option.…
You then have to make sure that the risk of the new project is not higher.…If it's higher, you would then be making the…same money, but for more risk, which doesn't make sense.…If the risk is smaller than the next best project, then it would make sense to…invest here as you would be reducing your risk to get the same profits in the end.…If the NPV is greater than zero, that means that the project…would be making more money than the next best option available to you.…If the risk is lower or the same as the next best project, then you should…
This course teaches the net present value (NPV) methodology, an investment evaluation formula used by countless publicly traded companies and financial analysts, in a way that makes it accessible and applicable to you—no finance background required. Rudolph Rosenberg explains what investments are, how they are measured, and what makes a good investment. Then he explores the NPV formula in depth, showing you how to evaluate your cash flows, choose a rate of return, and assess the risk of a particular investment. This all culminates in a look at how the principles of investment apply to three real-life scenarios that any individual or company might encounter.
- What is an investment?
- Understanding ROI
- What makes a good investment?
- Using the NPV formula
- Assessing risk
- Applying NPV to real-life situations