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Finance for IT Decision Makers - A practical handbook by Michael Blackstaff

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2 DECISIONS, DECISIONS…

OBJECTIVES

When you have studied this chapter you should be able to:

  • define ‘cash flow’ and explain its importance in financial decision-making;
  • build a simple financial case from a given set of data;
  • explain the importance of determining which cash flows are relevant to the investment being evaluated;
  • describe the concept known as ‘discounted cash flow’ and apply it to a simple financial case;
  • explain what is meant by ‘cost of money’ and ‘opportunity cost’;
  • describe the relationship between interest rates and inflation, and explain its relevance to financial decision-making.

WHAT IS CASH FLOW?

From time to time we do what we call back-of-envelope calculations to test whether a particular idea is worth pursuing or ...

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