Capital Budgeting: NPV, IRR, Payback | MUST-KNOW for Finance Roles

Learn the main capital budgeting techniques: NPV, IRR, and Payback Period using real-life examples on Excel.

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In the video you'll learn assess whether you should accept or reject a project based on the Net Present Value, the Internal Rate of Return, and the Payback Period calculation. Throughout, explain some of the limitations of each method. We'll go over the theory for each, and then we'll apply our learnings on Excel using their built-in formulas.

Firstly, we'll introduce capital budgeting, going over what it means and what kind of projects are usually assessed using this method. Then, we'll introduce our scenario, which is working at Nike as a financial analyst and trying to decide whether to accept or reject the opening of two new Nike stores.

For the NPV, we'll consider the time value of money, discount rates, and other important factors. For the IRR, we'll first explain the theory followed by using the IRR formula on Excel.Lastly, for the payback period we'll first calculate it and then introduce the Discounted Payback Period which does account for the time value of money.

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Chapters:
0:00​ -​ Capital Budgeting
0:41​ - NPV
4:46​ - IRR
7:12 - Payback Period

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