CB-ACCTG

Internal Rate of Return is a discount rate in which the net present value of an investment becomes zero. The investment should be accepted if the IRR is not less than the cost of capital. The IRR measures risk, by showing what the discounted rate would have to reach to lose all present value. Futronics Inc. investment would have an IRR of 14.79%. The investment should be accepted since it is greater than the 8% cost of capital. The 14.79% IRR shows the growth expected from the

d. internal rate of return (IRR) the discount rate that forces a project’s NPV to equal zero. The project should be accepted if the IRR is greater than the cost of capital.

Part II – In Part II, you will provide the company with a recommendation for purchasing a new machine. You will base your recommendation on the Net Present Value (NPV) of the capital investment project using the cost of capital (WACC) as your discount rate.

Capital Investment decision is financial term is also known as Capital Budgeting. Its important goal is to upraise the firms profit by taking on a project at the suitable time.

The rate of return on common shareholders’ equity ratio is an indication of a company’s ability to generate income for each dollar invested by its

Return on investment - The ratio of money gained or lost on an investment relative to the amount of money

Target Return objective - sets a specific level of profit as an objective. This amount is often stated as a percentage of sales or of capital investment.

Investment decisions companies make today will have a direct impact on their ability to reach financial objectives. Most companies are faced with questions such as: which projects should your company invest in, which returns are needed and what risks are the company willing to take to achieve company goals?

D) What is the project’s modified internal rate of return (MIRR)? How does MIRR differ from IRR?

* Analyze the factors that influence investment decisions at different stages in an investor’s life cycle, and make a recommendation at which stage the average investor should consider financial investments. Provide support for your recommendation.

According to the text, the initial costs for this project is $15 868 000 and in order to generate the Return on Investment, Jeff Wiemann decided to consider the useful life of the project to be 5 years (n=5).

Secondly, the investor has a high chance of earning more money in the form of profits as a

Therefore, projects with expected return below 7.02% should be rejected if we only recommend a single and solitary hurdle rate. If doing so, we would ignore the difference between business line and probably accept projects with too higher risk relative to its comparable or reject projects with appropriate risk in its business.

Internal rate of return (IRR) is a rate of return on an investment. The IRR of an investment is the interest rate that will give it a net present value of zero.

This would suggest that the investment decision could possibly go wrong any time from now