Managing Investment

Learn the 25 keys to selecting and managing outside investment, through mergers, acquisitions and project-specific financing, as well as R&D internal investment, for long-term growth and expansion:

• Key 1. Sound strategy + Timely investment = Shareholder value.
• Key 2. Cash flow counts.
• Key 3. A dollar today is worth more than a dollar tomorrow.
• Key 4. Follow the net present value rule.
• Key 5. N.P.V. = Incremental Shareholder Wealth.
• Key 6. See your risk as your shareholders see it.
• Key 7. Know your cost of capital.
• Key 8. The cost of capital is project-specific.
• Key 9. Estimate incremental cash flow effects.
• Key 10. Don't forget additional investment in working capital, plant and equipment.
• Key 11. Don't forget terminal value (but don't overestimate it, either).
• Key 12. Include project tax consequences.
• Key 13. Inflation: be consistent between cash flows and discount rates.
• Key 14. Overseas investment: incorporating exchange rates.
• Key 15. Watch out for project options.
• Key 16. Know how and when to make replacement investments.
• Key 17. Understand the value of R&D.
• Key 18. Know where positive N.P.V.s come from.
• Key 19. Watch out for biased forecasts.
• Key 20. Perform sensitivity analysis.
• Key 21. Continue to monitor projects after approval.
• Key 22. Arrange financing with an eye toward future investment opportunities.
• Key 23. Be alert for project-specific financing opportunities.
• Key 24. Mergers: understand incremental benefits.
• Key 25. Mergers for stock: know how much you are paying.

Managing Investment is part of The New York Times Pocket MBA Series, a reference series easily accessible to all businesspersons, from first-level managers to the executive suite. The 12-volume series is written by Ph.D.s who teach in the finest graduate business programs in the country, and edited by business editors from The New York Times. The structure of each volume presents an unparalleled synopsis of crucial principles of specific areas of business expertise.