Hi Sandip!! How are . Will you be able to help me in below discussion

This one is all about the modules we're covering this week Capital budgeting. Ron doesn't understand the concept of the time value of money and how that is used in calculating the net present value of his new plant. It's your job to explain it to him in language that he can understand plain English, no accounting or finance jargon allowed!

1. Explain to Ron what the Net Present Value (NPV) means in terms of his new plant (I did the calculations for you using an internal rate of return of 5%, the project has a negative NPV of $417,044). (3 marks)
2. Now talk about the Internal Rate of Return for Ron's project and what that means. (Again, I number crunched for you: IRR = 0.45%) Hint: consider alternate uses for that money and the return it might earn if you invested elsewhere or even if you just left it in the bank (3 marks)
3. The calculated pay back for Ron's project is 9.76 years (see pages 346-347 in your text for explanation of payback). Can you use that figure to try to convince Ron that this plant is just a bad idea? (2 marks)

I did the number crunching for you because I want you to focus on the interpretation of the numbers. In your career, you are unlikely to be required to actually calculate these numbers but you most certainly could be sitting around the strategy table discussing the merits of a new project I want you to be able to hold your own with the Finance guys!!