• 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 this 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 this
  

Net Present Value Project A Project B Present Value of cash inflow $126,000 x 3.31 $417,060 $52,800 x 3.31 $174,768 Present value of cash outflow -400,000 -160,000 Net Present Value $17, 060 $14,768 Internal Rate of Return Project A Project B Cost of Investment $400,000 $160,000 Annual Cash Inflow $126,000 3.18 $52,800 3.03 9% 3.24 0.063 12% 3.04 ? 3.18 ? 3.03 0.007 10% 3.17 0.004 13% 2.97 0.558 .067 or .07 0.06 Internal Rate of Return 9% + [(.06/.07])x 1% ]= 9.93% 12% + [(.01/.06) + 1% = 12.11%