NPV and IRR to make replacement decision. Net Present Value : The net present value is the differential amount between the net cash inflows from future investments and net cash outflows in the form of costs that the company has to pay at present as initial cost of investment. Internal Rate of Return The internal rate of return is an integral part of capital budgeting decisions which is termed as a discount rate at which the cash flows of a particular project are equated at nil value.

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Chapter 6, Problem 21QP

Summary Introduction

To determine: NPV and IRR to make replacement decision.

Net Present Value:

The net present value is the differential amount between the net cash inflows from future investments and net cash outflows in the form of costs that the company has to pay at present as initial cost of investment.

Internal Rate of Return

The internal rate of return is an integral part of capital budgeting decisions which is termed as a discount rate at which the cash flows of a particular project are equated at nil value.

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