NPV, IRR | Quantitative Methods – 23 | CFA L1 | FRM P1

In this session, you will learn:

Why simple profit logic fails when time is involved
How time value of money changes investment decisions
What Net Present Value (NPV) actually means
How to calculate and interpret NPV using real cash flows
Why Required Return is critical
What IRR really represents
How IRR is calculated and interpreted
Why NPV and IRR always give the same accept-reject decision
The difference between return on investment vs return of investment

Class notes written on the board are available in the App under the ‘Quantitative Methods’ - ‘Time Value of Money’ chapter. Please note that the lectures are to be done as per the order of the playlist and not the textbook.
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00:00 – Why NPV & IRR Are the Most Important Finance Concepts
02:10 – Simple Profit Logic vs Time Value of Money
04:30 – Buy Now Pay Later & EMI Example
07:10 – Factory, Real Estate & Long-Term Projects
09:40 – Why Simple Profit Calculation Breaks Down
12:00 – What Is Net Present Value (NPV)?
14:30 – Cash Flow Sign Convention (Inflow vs Outflow)
19:30 – Discounting Cash Flows at Required Return (10%)
22:00 – Calculator Method: CF0, CF1, CF2, CF3, NPV
27:00 – What Is Required Return (RE)?
29:30 – Why NPV Cannot Be Calculated Without a Discount Rate
31:30 – Why NPV Gives Profit but Not Percentage Return
33:40 – Profit Percentage Logic for Single-Period Sales
24:30 – Interpreting NPV Result
36:10 – What Is IRR (Internal Rate of Return)?
38:40 – IRR Equation Explained Intuitively
41:00 – Calculator Method: IRR Button Explained
43:20 – IRR Result: 14.42% Meaning
45:30 – Why IRR Is Called ‘Internally Generated’ Return
48:20 – Why NPV & IRR Give Same Accept–Reject Decision
50:40 – Relationship Between NPV, IRR & Required Return
53:10 – Proving IRR Using Amortization Schedule
56:00 – Return ON Investment vs Return OF Investment
58:40 – What Happens When Cash Flows Reduce?
01:01:10 – NPV Becomes Negative: Reject Decision
01:02:00 – Summary

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Faculty- Aswini Bajaj, a qualified CA, CS, CFA, FRM, CAIA, CFP, CIPM, CCRA, CIRA, CIIB, AIM, and RV. He is also a guest lecturer (across 180+ colleges and 35+ IITs and IIMs), corporate trainer, and CEO of Leveraged Growth (Research and Consulting).

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