Strategic decision makers are required to be able to evaluate projects based on the long-term objectives of the

profileAhelping_expert
 (Not rated)
 (Not rated)
Chat

800–1,000 words
Strategic decision makers are required to be able to evaluate projects based on the long-term objectives of the firm as well as the project’s ability to earn the company additional compensation. The 3 main tools used to make this evaluation are the pay-back period, net present value (NPV), and internal rate of return (IRR).
Year

Project #1

Project #2

Project #3

0

($30,000)

($32,000)

($35,000)

1

$11,000

$15,000

$11,000

2

$11,000

$14,000

$11,000

3

$11,000

$11,000

$11,000

4

$11,000

$2,000

$11,000

5

$11,000

$500

$11,000

Scenario

NPV Rate

1

5%

2

5.5%

3

6%
Using the data in the tables above, answer the following questions:

Calculate the NPV for each project using each scenario's NPV rate. Show your work.
Calculate the pay-back period for each project. Show your work.
Calculate the IRR for each project. Show your work.
Which project would the company select using the NPV method in scenario 1? Explain your answer.
Which project would the company select using the NPV method in scenario 2? Explain your answer.
Which project would the company select using the NPV method in scenario 3? Explain your answer.
Which project would the company select using the pay-back period? Explain your answer.
Which project would the company select using the IRR method? Explain your answer.

    • 10 years ago
    Capital budgeting decisions represent long term commitments of resources of an organization. A firm may have
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      npv_irr_and_payback_file.docx
    • attachment
      npv_irr_and_payback.xlsx