Concept explainers
a)
To determine:
Payback period of each project.
Introduction:
Every investment requires a time period to pay back the cost of investment. The time period taken to recover the cost of an investment is known as the payback period.
b)
To determine:
The
Introduction:
The difference between the present value of cash inflows and the present value of
c)
To determine:
The
Introduction:
Internal Rate of Return is a measure utilized in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net
d)
To determine:
The Net Present Value profiles for each project.
Introduction:
The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.
NPV profile is a graphic representation of the NPV of a project at different discount rates.
e)
To determine:
Rank the projects based on the payback period, NPV and IRR values.
Introduction:
Every investment requires a time period to pay back the cost of investment. The time period taken to recover the cost of an investment is known as the payback period. The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero.
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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
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