One of THE best if not THE best explanation of capital budgeting I have seen, not to mention the step by step process. Not only that I now understand the the calculation, but I now also understand the concepts and why we do the calculations the way they are done.

@accountingstepbystep2229

3 жыл бұрын

Thank you so very much for your kind words! I am most happy that you found the video helpful and that it helped with both the calculations and concepts. I hope the other videos on the Channel will also be helpful as well. Again, thank you for your comment and thank you for watching the video. Your comment made my week! Best regards, Mike Werner

THIS WAS INCREDIBLY EASY TO FOLLOW! THANKS

@accountingstepbystep2229

3 жыл бұрын

Dear Brenda, Thank you so much for your comment! Your comment made my day! Actually, your comment made my week! I hope you gave the video a thumbs-up! Thanks again and best regards, Mike

Professor Werner, Thank you so much for this video. It’s the way you explained complicated things in simple terms that make it so interesting. Also, the use of the calculator clarify common errors that discourage any student when we try it . Many thanks

@accountingstepbystep2229

Жыл бұрын

Dear Peggie. I love your comment and feedback! I am so very pleased that you found the videos helpful. I hope things are going will with your studies and wish you the very best of luck!, Best regards, Mike Werner

That's explained in a lucid way and honestly very well done - please request to incorporate some more concepts on statistical tools like Probability , Regression, Standard deviation, derivatives etc

I need to incorporate these formulas into a spreadsheet, but the calculators you used were wonderful. I like you the way you clearly express things.

@accountingstepbystep2229

Жыл бұрын

Hi Cris. Thank you so much for your positive feedback! I hope the video is helpful to you as you prepare your spreadsheet. Thank again and best regards, Mike Werner

Very informative. I was really lost and didn’t understand anything but now I’m good to start with my assignment

@accountingstepbystep2229

3 жыл бұрын

Thank you so much for the nice comment! I really appreciate it and wish you all the best as you work through your assignments and your classes! Best regards, Mike Werner - Miami

EXCELLENT. REALLY THE BEST WE HAVE FOUND

@accountingstepbystep2229

2 жыл бұрын

Dear Evdoxia, Thank you for your comment and thank you so much for your kind words. I truly appreciate it! I hope the video was helpful. Best regards, Mike

Great and insightful.Thank you

@accountingstepbystep2229

2 жыл бұрын

Dear Fedelics, Thank you for your comment and thank you for watching my video. I am very happy it was helpful! Best regards, Mike

Dear friends, I have a question: 1/ in the capital budgeting for 4 years, I can add multiple discount rates of any project to calculate NPV?. For example: Discount rate of year 1 is 8%. Discount rate of year 2 is 10% Discount rate of year 3 is 8%. Discount rate of year 4 is 9%

@accountingstepbystep2229

3 жыл бұрын

Dear YToung, Thank you for your comment and your question. Yes, you can easily use multiple discount rates. However, generally the discount rate used is the "required rate of return", which generally does not change from year to year. But if your required rate of return changes from year to year, you could use those rates to calculate the NPV. No problem! The way to do it with tables or a calculator is to bring each cash flows to present value individually using the discount rate for that year. For tables, you would bring each amount back to present value using the "PV of $1 table". For example, for year 1 find the PV of a $1 for 1 year at 8% and multiply it by the cash flow for year 1, then for year 2 find the PV of a $1 for 2 years at 10% and multiply the factor by the cash flow for year 2. Continue this process for each year and then add the amounts together and subtract the required investment from the total of the PVs to arrive at the net present value. Using a financial calculator, bring each cash flow back to present value by entering the number of periods in N, the required rate of return in I, and the cash flow for the year in FV, enter zero for PMT to calculate the PV for that year. For example, for year 1 enter 1 for N, 8 for I, the cash flow for year 1 in FV, zero in PMT and then calculate PV. Then for year 2 enter 2 for N, 10 for I, the cash flow for year 2 in FV, zero in PMT and then calculate PV. Continue this process for each year and then add all the PV amounts together and subtract the required investment from the total of the PVs to arrive at the net present value. I hope this information is helpful. Again, thank you for your comment! Please enter another comment to let me know you received this information and whether or not it worked out for you. Best regards, Mike

@ntcuong01ct1

3 жыл бұрын

@@accountingstepbystep2229 , thank you, what's PMT?

@accountingstepbystep2229

3 жыл бұрын

@@ntcuong01ct1 Dear yToung, In answer to your question, "PMT" is the designation for the key on a financial calculator to enter the "payment" or what is sometimes called the annuity. An Annuity is an annuity is the stream of payments that are equal in amount with an equal time span between each payment. Thank you for your comment and best regards, Mike Werner

Well explained and easy to understand. Kudos.

@accountingstepbystep2229

2 жыл бұрын

Hi Franklin. Thank you for your comment and kind words! I wish you a Happy New Year and very best regards, Mike

You saved me from dropping out of a finance class thank you so much

@accountingstepbystep2229

7 ай бұрын

OMG, I am so happy you were able to complete the course and I hope your grade was as good or better than you were hoping for. Thank you so much for your comment and encouragement. It's truly my pleasure and I am so pleased the videos were helpful. Again, thank you and very best regards, Mike

Very good explanation of the methods and how respected they are. I would suggest to use an excell for calculation sine calculators are no longer in use. Formulas solve those calculations in a second.

@accountingstepbystep2229

2 жыл бұрын

Dear Irene, Thank you so much for watching my video and the kind words. Also, thank you for the suggestion about MS Excel. I'll try to include it in a future video, Best regards, Mike

Thank you very much i am very happy in this presentation

@accountingstepbystep2229

2 жыл бұрын

Thank you so much for the comment! I am happy that you found the video helpful. Have you viewed any of my other videos?

Thanks 👍

@accountingstepbystep2229

3 жыл бұрын

My pleasure! Have a great day! Best regards, Mike

Thanks sir, thanks so much 🙏🙏

@accountingstepbystep2229

Жыл бұрын

Hi Patricia! I love your comment and you're quite welcome. I am happy you found the videos helpful and wish you the best of luck. Best regards, Mike Werner

Hello everyone I want to know how do we calculate the PV when given different payments? Thanks 😀

@accountingstepbystep2229

2 жыл бұрын

Calculating PV with differing cash flows is not that difficult, actually. If you take a look at the video beginning at about 12:06 I get into calculating the PV of a stream of $11,000 cash flows. I use the Present Value of $1 table to calculate the PV of each year individually. Then, in the minutes that follow, I show how to do this in a more organized manner using this table. What you would do for cash flows that differ from one year to the next is to do the same calculation, but instead of using the $11,000 each year, use the dollar amounts you have for each year. On a calculator, you would do a separate calculation for each year, by entering the cash flow you expect for each year as the FV (Future Value) and solving for the PV for each of the years, for each of the different cash flow amounts. I hope this helps. If you need more info, please let me know.

ur a legend

@accountingstepbystep2229

Жыл бұрын

I love your comment! Thank you so much for the kind words! Best regards, Mike Werner

Do they call it the ''internal''' rate of return because its specific to the firm/project receiving the investment from the creditors/investors?

@accountingstepbystep2229

2 жыл бұрын

Thank you for your question. The internal rate of return is the rate of return generated by the project itself and it’s called the “internal” rate of return because the calculation excludes external factors, like the risk-free rate, inflation, the cost of capital, or financial risk. Happy New Year and best regards, Mike

@user-vq5wh4kf2q

2 жыл бұрын

@@accountingstepbystep2229 Thank you for the clarification

@accountingstepbystep2229

2 жыл бұрын

@@user-vq5wh4kf2q You are quite welcome! Happy New Year and best regards, Mike

I came by to see your video and I had no sound. I checked my computer and all is well. I see as far as yesterdayit appears othave had audio.

@accountingstepbystep2229

2 жыл бұрын

Dear Chris, The sound finally came through, right? If not let me know so I can check to see how I can help. Thank you for your message and best regards, Mike

help full

@accountingstepbystep2229

Жыл бұрын

Hi Rabui. Thank you for your comment! I am happy you found the videos helpful!

Hello friends, I have 1 of the following situations: 1 / Company X has a large project with an investment of 1 billion USD, and its capital structure is expected to have 10% capital from the company and 90% capital from the bank, the bank will finance the capital as follows: The project is divided into 3 phases: Phase 1 is 200 million USD, when phase 1 comes into operation and has a turnover of 50 million USD, then proceed to phase 2. Phase 2 is 500 million USD, when phase 2 comes into operation and has a turnover of 300 million USD, then proceed to phase 3. Phase 2 is 300 million USD, when phase 2 comes into operation and has a turnover of 200 million USD, the bank starts collecting interest. Question: I want to calculate the NPV, IRR of the whole project, will I split the project by phase or by the total of a large project? Thank you.

@accountingstepbystep2229

3 жыл бұрын

Wow! Sounds like a huge project. I hope you are able to find a financial professional that is able to help you navigate through this complex situation. Perhaps the consulting group of one of the Big 4 CPA firms can provide the needed guidance. Best of luck with it and best regards, Mike

@jiahaochang8628

2 жыл бұрын

@@accountingstepbystep2229 lol

Hello friends, I have a question about capital budgeting: 1 / Assuming company X has a project that needs to invest in 3 years with a capital of 1 billion USD and starts in 2015. But the company is short of money, so it is expected to invest in 2015, 2017, 2019. Question: So we will calculate the cost of capital for the initial investment including 2016 and 2018 ?. Interest is 12% per year Thanks.

@accountingstepbystep2229

3 жыл бұрын

Dear YToung, If the interest rate is 12% for each of the years, I suggest using a cost of capital of 12% to keep the bank happy, as long as the owners are also satisfied with a 12% rate of return. If the owners require a different rate of return, I suggest calculating a weighted average cost of capital based on the proportionate share of the investment from the owners and creditors and their respective required rates of return. For example, if the total investment is $4 million dollars and it is financed by $3 million in debt at 12% and an investment by owners with a required rate of return of 8%, to determine the weighted average cost of capital multiply the the 12% by $3M/$4M, which will render .09 and multiply the the 8% by $1M/$4M, which will render .02 and then then add the two results up, .09 +.02 = .11. The .11 equals 11%,which you would use as your weighted average cost of capital. I hope this information is helpful. Thank you for your comment and very best regards, Mike

@ntcuong01ct1

3 жыл бұрын

@@accountingstepbystep2229 , thank you

@accountingstepbystep2229

3 жыл бұрын

@@ntcuong01ct1 Dear YTuong, You are most welcome! Thank you for your comment and best regards, Mike Wernerr

it's multiply from present to future, and division from future to present, why you didn't divide the 11K instead you multiplied it

@accountingstepbystep2229

3 жыл бұрын

Thank you for your comment and question! When using a Future Value of $1 table in the conventional manner, that is to go from present value to future value, one would multiply. And when using a Present Value of a $1 table in the conventional manner, that is to go from future value to present value, one would also multiply. On the other hand, if you use a Future Value of a $1 backwards, that is to use a Future Value table to calculate Present Value, then you would divide to go from future value to present value. Likewise, if you use a Present Value of $1 backwards, that is to use a Present Value to calculate Future Value, then you would divide to go from present value to future value. In the video, we do not use the tables backwards or in reverse, but rather we use them in the conventional manner, so we multiply the values in question by the factors taken from the tables. Again, thank you for your comment and question.