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Business analysis - Assignment Example

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At the end of the project life, there is a 43 percent return for every unit invested in the project, in this case, 43 percent to a euro (see Table 1). This seems a positive indicator for the project as the return on capital employed is higher than the prevailing 12 percent cost…
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Payback period is another crude financial parameter as it does not take into account the time value of money. Moreover, it fails to consider, in general, the value of the net cash flow proceeds after the payback period. Unfortunately, the project above has been assessed to have a DCF whose present value is below the total cost of investment (see Table 3). It is not recommended, therefore, to investment in the project since the present value of the discounted net cash flow which the project will receive, will be smaller or lower, compared to the needed capital investment, or the total cost of the

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