The internal rate of return (IRR) of a project must be compared to its Blank______ in order to determine the acceptability of the project. Multiple choice question. real rate of return required rate of return profitability index accounting rate of return

Determine the internal rate of return of a project?

How is the Rate of return is an intuitively familiar and understandable measure of project?

Compare and contrast different project evaluation methods, including net present value (NPV), internal rate of return (IRR), and payback period. When is each method most suitable for project analysis?

Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate…

Calculating Net Present Value of a project is an application of which technique: a. SWOT Analysis.b. Future value.c. Cost Benefit Analysis. d. Discounting.e. Compounding.

QUESTION 1 The accounts manager of VM Gym & Sports has been asked to evaluate a potential capital investment of a set of rowing machines. The following data is available for cach project: Machine 1 Machine 2 RM RM Cost (immediate outlay) 500,000 245,000 Expected annual profits (losses) Year 1 I. 80,000 84,000 Year 2 90,000 136,000 Year 3 116,000 126,000 Year 4 146,000 150,000 Annual running costs 30,000 24,000 Annual service costs 36,000 20,000 Estimated residual value equipment 40,000 30,000 *The total annial running and service costs for Machine 2 in the first year is RM 36,000 The committee has estimated a cost of capital of 30% and employs the straight-line method of depreciation for all fixed assets when calculating net profit. The following discount factors are given: Year Cost of capital 10% 50% 0.909 0.667 2. 0.826 0.444 3. 0.751 0.296 4. 0.683 0.198

Critically analyse the benefits and limitations of the NPV and Accounting Rate of Return (ARR) investment appraisal methods

Explain the concept of sensitivity analysis as determined by NPV Breakeven sensitivity.  How is it measured and what insights does it provide about the risk of a project?   Goal seek can be used to evaluate the NPV breakeven of an input.  What needs to happen next in order to evaluate and interpret the results?  How do we know whether the results suggest that an input adds a little, or a lot, of risk relative to a project?

b) Explain what is meant by the internal rate of return (IRR) in the context of project appraisal. What are the drawbacks of the IRR method? i) Discuss the pros and cons of the various numerical methods such as the bisection method, linear interpolation technique, the Newton-Raphson method and the secant method in determining the IRR. You should also clearly discuss any methods used in determining the initial iterate. ii) Suppose one estimates that they can afford to repay £1200 a month for 25 years on a mortgage. Interest is calculated at 4.3% p.a., payable monthly. How large a mortgage can the individual afford? iii) How much would an investor pay now (beginning of the month) for an annuity, which pays £1,500 at the end of each month for 10 years, if the current interest rate is 12% p.a. compounded weekly?