IRR, NPV and payback of the project. Internal Rate of Return (IRR) The internal rate of return is the discounting rate of capital budgeting in which the NPV of the cash flow of the project comes equally to zero. Capital Budgeting: The decision-related to the investment for long run is called capital budgeting. Capital budgeting includes the investment in the heavy machinery and information technology. Net Present Value (NPV): The net present value is a differential amount of the net cash inflow from future investments and net cash outflow in the form of cost that the company has to pay at present as initial cost of the investment.

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Chapter 6, Problem 1MC1

Summary Introduction

To determine: IRR, NPV and payback of the project.

Internal Rate of Return (IRR)

The internal rate of return is the discounting rate of capital budgeting in which the NPV of the cash flow of the project comes equally to zero.

Capital Budgeting:

The decision-related to the investment for long run is called capital budgeting. Capital budgeting includes the investment in the heavy machinery and information technology.

Net Present Value(NPV):

The net present value is a differential amount of the net cash inflow from future investments and net cash outflow in the form of cost that the company has to pay at present as initial cost of the investment.

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