Analyze the results of internal rate of return calculation

Reference no: EM133653120

Assignment

Review the scenario

Scenario: Dwight Donovan, the president of Donovan Enterprises, is considering 2 investment opportunities. Because of limited resources, he will be able to invest in only 1 of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of 4 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 $400,000 and for Project B are $160,000. The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next 4 years. Donovan Enterprises' desired rate of return is 8 percent. Your task as Senior Accountant is to use your knowledge of net present value and internal rate of return to identify the preferred method and best investment opportunity for the company and present your results to Dwight Donovan.

Use Excel-showing all work and formulas-to compute the following:

1. Compute the net present value of each project. Round your computations to 2 decimal points.
2. Compute the approximate internal rate of return for each project. Round your rates to 6 decimal points

Create an 8 to 12 slides PowerPoint presentation showing the comparison of the net present value approach with the internal rate of return approach calculated above. Complete the following in your presentation:

1. Analyze the results of the net present value calculations and the significance of these results, supported with examples.

2. Determine which project should be adopted based on the net present value approach and provide a rationale for your decision.

3. Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples.

4. Determine which project should be adopted based on the internal rate of return approach and provide a rationale for your decision.

5. Determine the preferred method in the given circumstances and provide reasoning and details to support the method selected.

6. Synthesize results of analyses and computations to determine the best investment opportunity to recommend to the president of Donovan Enterprises.

Reference no: EM133653120

Questions Cloud

Developing global sales and marketing initiatives : Gain the ability to analyze and understand particular obstacles that sales and marketing teams encounter while developing global sales and marketing initiatives

Advising on whs principles that support safe design : Advising on WHS principles that support safe design. Advising on a systematic approach to WHS risk management for safe design, including advising on procurement

Discussion to emphasize how christian worldview : Your discussion to emphasize how a Christian worldview allowed you to view this information from a different perspective.

Integrity and confidentiality of digital resources : A group of individuals work together to ensure the integrity and confidentiality of digital resources.

Analyze the results of internal rate of return calculation : Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples.

Broker and interact with volunteer in range of scenarios : You will act as a broker and interact with a volunteer in a range of scenarios. You will be required to make audio recordings of your discussions.

Traditional business model : Have added value for their customers by providing them with access to information that they did not previously have under the traditional business model.

Applying the relevant rule of law to the facts : Judge Judy is overseeing the case of Pepsi v. Coca-Cola. Applying the relevant rule of law to the facts of the case requires Judge Judy to find previously

Institutional bias has been leading business industry : Institutional bias has been leading the business industry for quite some time, which is why DEI was developed.

User Account

All Pages