Decision models

Investment decision rules

• The NPV Decision Rule
• The Payback Rule
• The Internal Rate of Return Rule

"Since each method looks at the investment from a different perspective, it is best to employ multiple analyses and take the opportunities with the best return according to all techniques" (Marzec, 2017).

What is the significance of these rules?

"They evaluate investments and decide which projects to pursue" (Berk, 2015, p.753).

CFO:
Chief Financial Officer
"responsible for making complex financial decisions" (Module 7, 2017).

NPV Decision Rule:
"When choosing among investment alternatives, take the alternative with the highest NPV. Choosing the alternative is equivalent to receiving its NPV in cash today" (Berk, 2015, p. 755).

Payback Investment Rule:
"Only projects that pay back their initial investment within a prespecified period are undertaken" (Berk, 2015, p. 760).

Internal Rate of Return Rule:
"A decision rule that accepts any investment opportunity where the IRR exceeds the opportunity cost of capital and otherwise rejects the opportunity" (Berk, 2015, p.761).

“One strikingly consistent finding: Once people reach the C-suite, technical and functional expertise matters less than leadership skills and a strong grasp of business fundamentals” (Groysberg, 2011).

Wisdom:
"If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given him" (James 1:5).

Ethical Thoughts:
"For an overseer, as God's steward, must be above reproach. He must not be arrogant or quick-tempered or a drunkard or violent or greedy for gain, but hospitable, a lover of good, self-controlled, upright, holy, and disciplined. He must hold firm to the trustworthy word as taught, so that he may be able to give instruction in sound doctrine and also to rebuke those who contradict it. For there are many who are insubordinate, empty talkers and deceivers, especially those of the circumcision party" (Titus 1:7-14, ESV).

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