Let's look at these three criteria a little bit more.

But I want to go back and

do a little bit of revision of what we talked about already.

Don't forget, one thing you should remember when we talk about NPV.

A dollar today is worth more than a dollar in the future,

because we can invest it right away.

The net present value calculation, if you remember,

depends solely on the forecasted cash flows and the opportunity cost of capital.

Now, we can argue that the forecasted cash flows are variable or

can be played around with.

But let's assume that you make a reasonable forecast, and then you

know the opportunity cost of capital, so there's no real variables there.

So that's a big thing versus the other ways that people look at this.

And remember that because net present values are calculated based upon

the value today, we're calculating back to today the value of a project.

They are additive, meaning that it is unlikely that you will be

misled into investing in a good project that has a very positive NPV,

and one that's not so good or maybe even has a negative NPV, by having

somebody try to bundle them together which may still generate a positive NPV.

But if you look at the fact that each project is considered independently,

you would make the investment in the one that has a positive NPV,

and not make the one that was a negative NPV, okay.

So that's just to remember, keep in the back of your mind.

So again, the book rate of return.

That's equal to the book income divided by book assets, which I've already said.

But cash flow and book income are very different, right.

Cash outflows are classified as either capital or operating cost, right.

So capital costs are put on the company's books and depreciated.

So if I'm looking at the book cost of this project, it could be zero because

there's no cash outflow because I'm capitalizing on the book.

Now, operating costs are deducted from book income.

So there's lots of things that are going on that makes book rate of return not