1. Question Rainbow Products Savings - $5000/year Machine costs $35.000 Expected to last for 15 years Cost of capital 12% A. payback?‚ NPV?‚ IRR? Payback: The amount of time required for a firm to recover its initial investment. by dividing the initial investment by the annual cash inflow. In our case $35.000/$5000= 7years NPV: Investment- the PV of its cash inflows discounted at a rate( the firm’s cost of capital) NPV= -$35.000- $34.054= -$946 so NPV less than $0‚ the
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NPV is short for Net Present Value and it makes difference between the present value and cost of a project. In addition‚ NPV takes into account all cash flows through out the whole life of the projects‚ as well as the time value of money. And it compares like with like as all inflows and outflows are discounted to today¡¯s date. Also‚ the cost of capital is very unlikely to be changed over a period of time. To judge if the NPV is good‚ we should see the value of it‚ and the rule is the high the better
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Janice Miller American Intercontinental University Managerial Accounting 310 Instructor: Matt Keogh Introduction “Net Present Value (NPV) is the present value of the net cash inflows generated by a project including salvage value‚ if any‚ less the initial investment on the project‚” (Irfanullah‚ Jan.‚ 2013). It is preferred as one of the most reliable measures employed in capital budgeting since it accounts for the time value of money as it uses the discounted cash inflows. The net cash
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ASSIGNMENT TOPIC: “THE ADVANTAGES AND DISADVANTAGES OF USINFG NPV (NET PRESENT VALUE) AND IRR (INTERNAL RATE OF RETURN)” NPV (NET PRESENT VALUE) The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. NPV compares the value of a dollar today to the value of that
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Rainbow Technologies Profile 2010 Page 1 of 24 Rainbow Technologies Company Profile Offices Durban +27 82 443 0007 peterc@rainbowtech.co.za PO Box 1001 Wandsbeck 3631 Richards Bay +27 83 269 1268 hugos@rainbowtech.co.za PO Box12240 Empangeni‚ 3880 Web Site : www.rainbowtech.co.za Rainbow Technologies Profile 2010 Page 2 of 24 INDEX 1. GENERAL ______________________________________________________________3 2. PRODUCTS & SERVICES ______________________________________________4 2.1
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Net Present Value Net Present Value (NPV) is used in capital budgeting to analyze the profitability of an investment or project. NPV is found by subtracting the present value of the after-tax outflows from the present value of the after-tax inflows. Investments with a positive NPV increase shareholder value and those with a negative NPV reduce shareholder value. In order to compute the NPV for Worldwide Paper Company‚ we have to calculate the cash flow in capital budgeting of the project as below
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Net Present Value and Internal Rate of Return by Harold Bierman‚ Jr Executive Summary • • • Net present value (NPV) and internal rate of return (IRR) are two very practical discounted cash flow (DCF) calculations used for making capital budgeting decisions. NPV and IRR lead to the same decisions with investments that are independent. With mutually exclusive investments‚ the NPV method is easier to use and more reliable. Introduction To this point neither of the two discounted cash flow procedures
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Assignment 1b: Rainbows When reading over the possible weather discussion categories the word rainbow stuck out for me. I have always wondered what makes a rainbow‚ and every time I see one I am in disbelief that I’m seeing such a remarkable thing. Rainbows are one of the most beautiful spectacles natures has to offer so beautiful‚ in fact‚ that they’ve inspired countless fairy tales‚ songs and legends. According to Wikipedia.com “Rainbows are optical and meteorological phenomena that cause a
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Strength of Character in No Rainbows‚ No Roses Every man is born with either a silver spoon in his mouth or a shovel in his hand. If the former is the case‚ that individual can look forward to a life of relative ease and privilege. If it is the latter‚ however‚ the person had best prepare himself to dig through the pile of misfortune life is going to heap upon him. This is the balance of life--that for every man born under a shining sun‚ there is at least one born under ominous gray
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assess whether it is viable to invest or not the NPV technique can be used to compare the present value of returns and costs. If the NPV is negative it implies that costs exceed returns and hence it would not be advisable to invest in such projects. There are also other investment appraisal techniques that are employed apart from the NPV; these are the pay back method‚ accounting rate of return and internal rate of return method. Net present value (NPV) is generally considered as the most correct method
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