Chapter Title containing the video:
Two Finance concepts/terms from video with definitions:
Video’s relevance to Corporate Finance decision-making:
Watch the video：
1. Chapter Title Containing Video: Overview of Valuation
2. Video Topic: The video explained and showed the certain processes and procedures for evaluating investment decisions. The video pictured the Three-Phase Investment Evaluation Process that consisted of the 8 detailed steps, and he explained that there is much more to making an investment decision than “by estimating a set of cash flows or doing some calculations”. His statement is backed up by the 3 phase 8 step evaluation process that we will be using.
3. Two Finance Concepts/Terms from Video with Definitions:
· Capital Expenditure: Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm.
· Net Present Value (NPV): NPV is the difference between the present value of cash inflows and the present value of cash outflows. It is used in capital budgeting to analyze the profitability of a projected investment or project.
4. Video’s Relevance to Corporate Finance Decision-Making: In this video, we briefly go over the steps of investment evaluation process and it is very relevant to corporate finance decision-making. We have gone over terms such as capital expenditure and net present value. When making corporate finance decisions, we have to evaluate whether or not a project or investment will be profitable because the goal is to make money and maximize shareholder return. In order to evaluate a project or investment, we use NPV. In finance, we know that money in the future is not worth as much as money today; by using NPV, we see how much future cash flow is equivalent to today’s cash flow. Capital expenditure is also important because we want to know how much money we have to spend in order to generate profit. Capital expenditure is also used to calculate NPV. In sum, it is very important for us to know how projects are evaluated and how we use these evaluations and results to make decisions.