• Analyze the results of the net present value calculations and the significance of these results, supported with examples.
• Determine which project should be adopted based on the net present value approach and provide rationale for your decision.
• Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples.
• Determine which project should be adopted based on the internal rate of return approach and provide rationale for your decision.
• Determine the preferred method in the given circumstances and provide reasoning and details to support the method selected.
• Synthesize results of analyses and computations to determine the best investment opportunity to recommend to the president of Donovan Enterprises and provide rationale for your recommendation.
• Include detailed speaker notes.
  

Calculations to derive the above figures are shown below: A B C D E F Cash Flows Present Value Present Value of Cash Flows 2 Year Project A Project B Factor @ 8% Project A Project B 3 10 -400000 -160000 =1/((1+8%)^A3) =B3*D3 =C3*D3 4 1 126000 52800 =1/((1+8%)A4) =B4*D4 -C4*D4 5 2 126000 52800 =1/((1+8%)^A5) =B5*D5 =C5*D5 6 3 126000 52800 =1/((1+8%)^A6) =B6*D6 =C6*D6 7 14 126000 52800 =1/((1+8%)^A7) =B7*D7 =C7*D7 00 a. Net Present Value (NPV) SUM(E3:E7) =SUM(F3:F7) 9 Project A should be accepted as its NPV is greater than NPV of Project B. 10 11 b. Internal Rate of Return (IRR) =IRR(B3:B7) =IRR(C3:CT) Project B Should be accepted as its IRR is greater than IRR of Project A and Cost of 12 Capital of 8%. 13 14 Summary: 15 a. Net Present 16 Value 17 Project A =ES 18 Project B =FS 19 Which project should be adopted? Project A 20 21 b. Internal Rate of 22 Return 23 Project A =E11 24 Project B -F11 25 Which project should be adopted? Project BNet present value (NPV) and internal rate or return (IRR): A B C D E F Cash Flows Present Value Present Value of Cash Flows NP Year Project A Project B Factor @ 8% Project A Project B 3 0 ($400,000) ($160,000) 1.000000000 $400,000.00) ($160,000.00) 1 $126,000 $52,800 0.925925926 $116.666.67 $48,888.89 5 $126.000 $52.800 0.857338820 $108.024.69 $45,267.49 6 3 $126.000 $52,800 0.793832241 $100.022.86 $41,914.34 4 $126,000 $52,800 0.735029853 $92.613.76 $38.809.58 a. Net Present Value (NPV) $17,327.98 $14.880.30 9 Project A should be accepted as its NPV is greater than NPV of Project B. 10 11 b. Internal Rate of Return (IRR) 9.93% 12.11% Project B Should be accepted as its IRR is greater than IRR of Project A and Cost of 12 Capital of 8%. 13 14 Summary: 15 a. Net Present 16 Value 17 Project A $17,327.98 18 Project B $14,880.30 19 Which project should be adopted? Project A 20 21 b. Internal Rate of 22 Return 23 Project A 9.93% 24 Project B 12.11% 25 Which project should be adopted? Project B