## 1. Free Cash Flow (FCF)

### 1.1. is the

1.1.1. amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets (known as capital expenditures)

1.1.1.1. Then

1.1.1.1.1. the calculation of the FCF for the shareholder would be

1.1.2. indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities

## 2. Payback Period (PRI)

### 2.1. what is

2.1.1. is the amount of time it takes to recover the cost of an investment. Simply put, it is the length of time an investment reaches a breakeven point.

2.1.1.1. You can figure out the payback period

2.1.1.1.1. Payback Period= (Avarage Annual)/(Cash FlowCost of Investment)

2.1.2. This metric is useful before making any decisions, especially when an investor needs to make a snap judgment about an investment venture.

## 3. Shareholder Cash Flow (FCA)

### 3.1. corresponds with

3.1.1. The cash that the company has generated in the year for its participants, understood as both the shareholder and the creditor

3.1.1.1. It is forged under the approach

3.1.1.1.1. that the company has two owners, who are the providers of funds, to whom the company must pay

3.1.1.1.2. represent

### 3.2. Calculate

3.2.1. to the holders of debt and shares is determined as the sum of the Cash Flow for the shareholder (CFa) and the Cash Flow of the debt (CFd). CCF = FCa + FCd

3.2.1.1. If each component

3.2.1.1.1. replaced by its formulation (seen above) a faster form of calculation is obtained.b

## 4. Net Present Value (NPV)

### 4.1. What is

4.1.1. NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period.

4.1.1.1. NPV Important

4.1.1.1.1. o Helps in making investment decisions. o Compares different investment options. o Incorporates the time value of money. o Considers the risk associated with investments.

### 4.2. It measures

4.2.1. the profitability of an investment.

4.2.2. indicates that the investment is expected to generate more money than it costs.

### 4.3. Calculate NPV

4.3.1. Formula: NPV = ∑(Ct / (1+r)^t) - C0 o Ct = net cash inflow during the period t o r = discount rate o t = time period o C0 = initial investment

### 4.4. Decision Making Based on NPV

4.4.1. Positive NPV: Accept the project. Negative NPV: Reject the project. NPV = 0: The project is breakeven.

### 4.5. Limitations of NPV

4.5.1. o Assumes a constant discount rate. o Does not consider qualitative factors. o May not be accurate for long-term projects.

## 5. Benefit Cost Ratio (BCR)

### 5.1. What is BCR?

5.1.1. o is a measure that compares the benefits of a project to its costs. o It is calculated by dividing the present value of benefits by the present value of costs. greater than BCR greater than 1 indicates that the benefits exceed the costs, and the project is profitable.

### 5.2. Important

5.2.1. o Helps make informed investment decisions. o Allows for comparison of different investment alternatives. o Facilitates communication of financial analysis results. o Is a useful tool for evaluating both public and private projects.

### 5.3. Calculate

5.3.1. o Formula: BCR = Present Value of Benefits / Present Value of Costs o Present value is calculated by discounting future cash flows at a discount rate

### 5.4. Interpreting

5.4.1. o BCR > 1: Benefits exceed costs, the project is profitable. o BCR = 1: Benefits equal costs, the project is marginal. o BCR < 1: Costs exceed benefits, the project is not profitable.

### 5.5. Limitations

5.5.1. o Does not consider all aspects of a project (e.g., social, environmental impacts). o The choice of discount rate can significantly affect the result. o Quantifying benefits can be difficult in some cases.

## 6. Internal Rate of Return (IRR)

### 6.1. Definition

6.1.1. The discount rate that makes the net present value (NPV) of an investment project equal to zero.

### 6.2. Objective

6.2.1. Measures the profitability of a project without considering the effect of inflation.

### 6.3. Calculating

6.3.1. • Trial and error method: Different discount rates are tested until the one that makes NPV zero is found. • Formula: NPV = ∑(Cash Flow / (1 + IRR)^t) - Initial Investment = 0

### 6.4. Interpreting

6.4.1. • IRR > Required Rate of Return: The project is profitable. • IRR < Required Rate of Return: The project is not profitable. • IRR = Required Rate of Return: The project is indifferent.

### 6.5. Advantages

6.5.1. • Considers the time value of money. • Is a relative measure of profitability. • Is easy to understand and compare.

### 6.6. Disadvantages

6.6.1. • Can have multiple solutions. • Not suitable for projects with irregular cash flows. • Can be sensitive to changes in assumptions

### 6.7. Applications

6.7.1. • Evaluation of investment projects. • Comparison of investment alternatives. • Sensitivity analysis.