Please justify the following in 250 words.

The note should have intext citations. For example, anything with numbers or quotes. The intent citation just needs to be the Author's last name and year it was published. Please also include REFERENCES. Thanks.

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Net present value is the difference between what company's cash flow is now in comparison to the future calculations that a company uses for the future. The Net Present Value can be used for analyzing a company's investment value for investors to make recommendations for opportunities of investment on a new upcoming project. The NPV can be affected by the time of the project and the discount rate for each year of the investment. Also, the Net Present Value represents the positive and negative future cash flows throughout an investment's life cycle. For NPV, it's a matter of asking "What is the total amount of money I will make if I proceed with this investment, after taking into account the time value of money?"(Fernando, 2022).

Both the Internal rate of return (IRR) and net present value (NPV) are methods companies use to determine the profitability of new investments. The internal rate of return is a method to determine the likelihood that a project may generate profit in percentage terms.To calculate the internal rate of return the organization would recalculate the NPV equation, to calculate IRR the NPV factor would be set to 0, and solve the unknown discount rate (Gallant, 2022). The internal rate of return can be more simplistic and a good choice for short-term projects or those without a discount rate.

Companies use both of the values for making capital budgeting decisions and this can be greatly beneficial for organizations.Internal rate of return can help a company determine the break-even cash flow level of investment while Net present value helps determine the surpluses that a project may generate. Each of these differing perspectives can help a company learn more about a project and its projected financial impacts.

Reference:

Fernando, J. (2022, November 15).Net Present Value (NPV): What It Means and Steps to Calculate It. Retrieved from Investopedia: https://www.investopedia.com/terms/n/npv.asp

Gallant, C. (2022, November 10).Present value vs. internal rate of return. Investopedia. Retrieved fromhttps://www.investopedia.com/ask/answers/05/npv-irr.asp#:~:text=our%20editorial%20policies-,What%20Are%20NPV%20and%20IRR%3F,the%20profitability%20of%20potential%20investments.

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Please justify the above in 250 words.

The note should have intext citations. For example, anything with numbers or quotes. The intent citation just needs to be the Author's last name and year it was published. Please also include REFERENCES. Thanks.

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