Introduction To Finance Principles | Report

Running head: INTRODUCTION TO FINANCE PRINCIPLES
Introduction to finance principles
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1INTRODUCTION TO FINANCE PRINCIPLES
Table of Contents
Part 1..........................................................................................................................................2
Answer 1................................................................................................................................2
Answer 2................................................................................................................................2
Answer 3................................................................................................................................2
Part 2..........................................................................................................................................5
Answer 1................................................................................................................................5
Answer 2................................................................................................................................5
Answer 3................................................................................................................................5
Reference....................................................................................................................................6

2INTRODUCTION TO FINANCE PRINCIPLES
Part 1
Answer 1
While evaluating new IT software project, cost expensed on marketing analysis is
irrelevant for decision in context of capital budgeting as it is sunk cost. However, usage of
van will be relevant for the purpose of decision in context of capital budgeting as opportunity
loss as the van can be rented out for the amount of $5000 per year. Depreciation on van will
not be relevant as even if the project is not accepted the van will be depreciated and hence, it
is not relevant for capital budgeting decision (Harris 2017)
Answer 2
Incremental free cash flow
Answer 3
Computation of NPV, Payback period and IRR
Above calculation are made as follows –