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Concepts · CA Intermediate/Financial Management & Strategic Management

Financial Management & Strategic Management

Ch 3 · Capital Budgeting (Investment Decisions)

5 concept points · 5 formulas · 4 exam-critical points.

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Concept
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Chart Summary
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Formula Sheet
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Important Points

⭐ Important points (exam-critical)

  • ⭐NPV preferred over IRR for mutually exclusive projects (scale/timing differences).
  • ⭐PI useful when capital is rationed.
  • ⭐Inflation: nominal cash flows discounted at nominal rate; real CF at real rate.
  • ⭐Replacement decisions: incremental cash flows + opportunity cost of existing asset.

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