25.8 - Capital Budgeting in Tech Companies
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Practice Questions
Test your understanding with targeted questions
What is the primary purpose of capital budgeting?
💡 Hint: Think about financial planning.
Name one technique used in capital budgeting.
💡 Hint: They are both methods for evaluating investments.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does NPV stand for?
💡 Hint: Think about the net worth of cash today vs future.
Is IRR a measure of monetary value?
💡 Hint: Consider how rates view investments.
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Challenge Problems
Push your limits with advanced challenges
A tech startup is considering two projects: Project A requires $30,000 initial investment with annual cash inflows of $10,000 for four years. Project B requires $25,000 initial investment with annual cash inflows of $7,000 for five years. Calculate both NPV (assuming a 12% discount rate) and determine which project is better.
💡 Hint: Perform NPV for both projects and see which one yields a greater value.
A company is looking at a new AI project expected to generate cash inflows of $20,000 per year for 5 years, with an initial investment of $50,000. How would they calculate IRR, and what considerations might affect this calculation?
💡 Hint: Think about how cash flow variations impact the IRR computation.
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