## CHECK THESE SAMPLES OF Net Present Value and Internal Rate of Return

...
James Hutchinson, 2008
http://consumereducation.suite101.com/article.cfm/net_present_value_and_the_lottery
The article talks about the patterns of payment if a person wins a lottery. A person has choice either to take all his winning in lump-sum or to receive the payment in installments. The article distinguishes that the amount stated as winning prize is the total money in installments whereas the lump-sum prize is usually lower than the sum of installment payments. The author states that lump-sum amount is calculated by using **Net** **Present** **Value** or NPV. Many people want to take the money home today than to wait for the installment payments. However, their decision might not be the same if the interest **rate** given by lottery firm...

4 Pages(1000 words)Article

... 2057.1936
4 (sale of building) 1300 1 21613.746
Less initial cash outlay (I0) (6000)
[300 + 1900 + 2000 + 18000
**Net** **Present** **Value** 16913.746
NPV of the project = 13.746 X 1000 = 16,913.746
CALCULATIONS EXPLAINED
1. To get the **present** **value** of future cash flows, we discount them using a suitable discounting **rate**. In this case it has been given as 9%. The annuity tables give a factor within a certain interest **rate** .This factor is then multiplied by the cash flows to obtain their **present** **values**. It is this factor that is referred to as the **present** **value** interest factor (PVIF). When discounted at a given discount **rate** (r) over a given number of periods (p) it is then denoted as PVIFr%np. np means 'no. of periods'.
2. 'Io...

6 Pages(1500 words)Essay

...PART A **Net** **Present** **value** 2. Pay Back period 3. **Internal** **rate** of **Return** In the NPV calculation above the **rate** of interest used is 20% whereby the NPV of cash flows is -1940. At IRR **rate** NPV has to be zero. So using interest **rate** of 21% NPV is calculated again as under
4. Appraisal on selling price lowered by 3 pence
5. Appraisal when sale volume greater by 10%
Please note that operational cost being fixed will not change with change sale volume.
6) Year sales in units = 52000 units
Assuming contribution is 20%
Sales = (30400/20) * 100 = 152000
Then Sales per unit = ((30400/20) * 100) / 52000 = £2.92 per unit (rounded)
Yearly sale on 900 units per week = 900 * 52 = 46800 units
Required per unit price to obtain same contribution...

5 Pages(1250 words)Essay

...
-1.2349
-1.4730
Option 3
0.5095
0.2701
0.1820
As can be seen from the above table, Option 1 has a positive **Net** **present** **Value** at a discount **rate** of 10%, and negative NPVs at 20 and 25%. Option 2 has negative NPVs for all discount **rates** considered. Option 3 has positive NPVs for all the discount **rates** considered.
Task 2 IRR
The **Internal** **Rate** of **return** (IRR) is the **rate** at which the NPV is equal to 0.This **rate** can be determined by interpolating between two **rates**, one of which has a positive NPV and the other a negative NPV.
Option 1
IRR = 10 + (0.0575/(1.1419+0.0575) x 10) =10.479
Option 2
IRR = 0.375/(0.375+0.5955) = 0.386
Note: The NPV for all discount **rates** applied in the case of option 2 are negative. Hence the NPV corresponding...

12 Pages(3000 words)Assignment

...
2013
16,000
0.51
8,160
2014
20,000
0.364
7,280
2015
24,000
0.26
6,240
2016
28,000
0.186
5,208
NPV
-14,544
Discount **rate** of 50%
Year
Cash flow
PVIF 50%, n
**Present** **value**
2011
-50,000
1
-50,000
2012
12,000
0.667
8,004
2013
16,000
0.444
7,104
2014
20,000
0.296
5,920
2015
24,000
0.198
4,752
2016
28,000
0.132
3,696
NPV
-20,524
c)
d) Approximately 25% discount **rate** gives a zero NPV. This **rate** is the **Internal** **Rate** of **Return** and **rates** below this give a positive NPV hence showing the viability of a project. On the other hand, **rates** above 25% give a negative NPV and such projects should not be undertaken.
Exercise 3: The Influence Diagram (Bayes Network) Model
This model could be extended by adding the effect of the energy bill on an individual’s...

6 Pages(1500 words)Assignment

...Question The three main capital budgeting techniques are payback period, **net** **present** **value** (NPV) and **internal** **rate** of **return** (IRR). The payback period calculates the number of years that it takes a company to recover its original investment. An advantage of this method is that it is simple to calculate. A con of the payback period is that it does not take into consideration the time **value** of money. The **net** **present** **value** calculates the **present** **value** of future cash flows of a project. A project is accepted only if the **present** **value** is above cero. An advantage of this method is that it takes into consideration time **value** of money. A con of this method is that the numerical **values** can sometimes lead to erroneous decisions (Arya & Fellingham...

1 Pages(250 words)Coursework

...The concept of **net** **present** **value** is an analytic tool that can help both corporations and novice investors. From an investor standpoint the use of netpresent **value** is very useful because **net** **present** **value** takes into consideration the time **value** of money. Due to inflation money depreciates over time. A person has $100 saved up in a cookie jar and leaves it there for five years will lose money because those $100 will not have the same purchasing power five years into the future. Using the **net** **present** **value** table can help a person determine how much interest is required to ensure that the individual does not lose purchasing power over time.
The **net** **present** **value** is also used in the corporate world as a capital budgeting technique referred...

1 Pages(250 words)Essay

... **Net** **Present** **Value** Learner’s Affiliated institute **Net** **Present** **Value** Initial investment 600,000 Duration = 5 years **Rate** = 10%
Cash flow:
Year 1: $380,000
Year 2: $390,000
Year 3: $400,000
Year 4: $410,000
Year 5: $420,000
**Net** **Present** **Value**: -$1,598,490.88
PV of Expected Cash Flows: $1,509.12
Discussion
At a **rate** of 10.00% and for a period of 5 years, the projected cash flows are worth $1,509.12 today, which is less than the initial $1,600,000.00. The NPV of the project is -$1,598,490.88, which implies that, the project is not likely to receive the expected **return** at the end of the project. For this reason, pursuing this project may not be an optimal decision.
However, despite the fact that, the projected capital project resulted...

1 Pages(250 words)Coursework

accordingly, they build up social networks to acquire needed know-how from peers and other contacts. Instant messaging, text messaging, and easy access to the information highway have grown to be the norm for social networking. Wireless communication for this generation is not so much technology as a staple of their young lives (Oblinger & Oblinger, 2005).

These students easily take for granted engaging multimedia settings with striking graphics and quality sound and expect comparable features in digital educational tools. Most have grown up with dynamic video games and multimedia entertainment and, by school age, almost all possess some personal experience of the marvels of technology (Tapscott, 1999). Besides offering a...

9 Pages(2250 words)Assignment

Specifically, some of the discussed models of exchange rate determination are the balance of payment approach model, the monetarist or asset approach model, and the martingale-random walk model. Moreover, the paper will also integrate the experiential observations and examples during the paper, in order to understand the practicality of these models.

Under the balance of payment approach, the domestic cost of foreign currency is established like the cost of any other article of trade. In other words, the market demand and supply curvatures are intersected in the exchange market for that particular foreign currency. The modeling of the abovementioned approach related to the demand and supply for foreign exchange is quite...

13 Pages(3250 words)Term Paper

... as companies makes long term commitment to their resources.
What is the IRR and what makes it useful? The **internal** **rate** of **return** is a **rate** used by companies to decide whether they should make investments by comparing the same with the cost of capital or hurdle **rate**. Whether it is a bond investment, a stock investment or real estate, the **return** is measured in **rates**. No wonder it is a more preferred method of measuring the efficiency of an investment over that of the **Net** **Present** **Value** (NPV) method which uses **value** or magnitude in declaring whether an investment is acceptable or not.
Its use with bonds on evaluating yield on investment is readily useful as a bond investment usually starts with an initial cash outflow...

8 Pages(2000 words)Assignment

In an internal audit, the internal auditors determine, assess and supervise an organization’s risk management, reporting methodologies, and control practices; at the same time give proposals for advancement. Although internal auditors are characteristically accountants, this activity can also be carried out by other qualified experts who are knowledgeable about the company functions as well as the necessary regulatory requirements. (Friedberg, 2004)

The span of internal auditing in an organization is expansive and it may engage internal control issues such as the effectiveness and efficiency of business processes, the consistency of financial reporting, preventing and inspecting fraud, protecting resources and oth...

10 Pages(2500 words)Term Paper

There has been a change of approach in the way that labor is reviewed in the organization and the modern perception emphasizes viewing labor as an investment and not as a commodity or resources. In this regard, labors have started to be seen as a made of creative and innovative social being who is able to give the organization a competitive edge. (Michael 2006, p. 42)

The term human resource has been changing to broader management and the concept of human capital has been applied more often in place of human resources. Therefore the modern perception of human labor has been changing the way organization have been handling their human capital to a more liberalized way. It has been realized that having a competitive workforce c...

13 Pages(3250 words)Assignment

To discover whether pure profits exist, take the revenue of the firm and deduct the costs of all factors of production other than capital. Then deduct the pure return on capital and any risk premium necessary to compensate the owners of capital for risks associated with its use. Anything that remains is pure profits.” Simply in economic terminology economic value added (EVA) is commercial profits reduced by opportunity costs (that is the pure return on riskless investment and the risk premium). Lipsey calls the EVA defined in this fashion as “pure profits, economic profits or, where there is no room for ambiguity, just profits”.

Investors in any company are interested in real profits that are profits r...

7 Pages(1750 words)Report

When organizational culture is discussed in the context of national culture, it is based on certain assumptions. According to Schein (2004 qt. Browaeys and Price 2008) culture can be defined as:

"...a set of basic assumptions - shared solutions to universal problems of external adaptation (how to survive) and internal integration (how to stay together) - which have evolved over time and are handed down from one generation to the next".

External adaptation here refers to factors or culture which the management can control while internal integration means the relationship which binds them to the group. In this context management styles and approaches are often influenced by the cultural value orientation - that...

7 Pages(1750 words)Case Study

So we can see the complete system, such as cars, airplanes, a block of buildings, etc. It is opposite to an experimental investigation by a material model or prototype of the system, such as an aircraft or car model in a wind tunnel.

The role of CFD in this contemporary technological world is crucial. It assists in the path of the global world of Computer Assisted Engineering or CAE that refers to the ensemble of simulation tools that support the work of engineers between the initial design phase and the final definition of the manufacturing process. The industrial production process uses various software tools for computerization of the whole production cycle. Among those tools, the most important is Computer-Assisted...

6 Pages(1500 words)Report

Liberalization of foreign investment and technology policy of the government is supportive of establishing industrial units in the country.

Threat: The UK food regulatory authority is planning to enforce the EC Regulations relating to food labeling. The labeling requirements under the new regulations will affect the food industry as the suppliers will be legally obliged to disclose the GM content of foods to the caterers. Thus business firms in the bakery industry also will be effected through the exclusion of flexible manner of labeling arrangements in the case of flour confectionery involving GM Soya or maize. (Genetically modified and novel foods (labeling) (England) regulations, 2000).

Trend: The new subs...

6 Pages(1500 words)Case Study

...The term HYBRID warfare is increasingly used to describe current and future conflict; what is it and what challenges does it **present**? The end of theCold War and the events of 9/11 have provided a catalyst for unprecedented challenges to the **international** order and national security policy. Arguably the most important challenge has been the appropriate and most efficacious method to combat a transient and intangible enemy, which transcends borders and the conventional notion of an organised army that “yet has shown a remarkable resilience against traditional military firepower”1.
Moreover, Mahmood’s observations highlight the changing nature of conflict and the fact that the contemporary **international** framework has removed pre-existing...

7 Pages(1750 words)Article

Maintaining accounting records as well as the preparation of internal financial reports is important to support activity that organizations may outsource in order to lower the cost as well as achieve higher quality. (Raiborn, Butler, & Massoudb, 2009). It is critical to note that outsourcing does not necessarily mean that the activities have been outsourced to another firm located in another country however, local firms can also undertake to perform the same jobs. It is this misconception that outsourcing often creates political and social debates for potential loss of jobs to foreigners through outsourcing.

Firms now need to prepare themselves for the volatile markets and fierce competition and as such the preparation fo...

18 Pages(4500 words)Research Proposal

As mentioned in the case study, the directors of AP plc expects that the minimum return to be 10% of the borrowed funds, which is used as the discount rate in calculating the NPV of each project. The expected cash flow from each year is multiplied by the discount factor to arrive at the present value at year 0 i.e. at the time of the making of the investment. An investment whose NPV is positive is considered to be a rewarding one, whereas an entity does not venture an investment whereas the NPV of the cumulative cash flows is negative. Where the management has to rank the investments, with the objective of giving priority to the most rewarding ones, the investment with the highest NPV must be ranked first. Calculating Internal Rat...

8 Pages(2000 words)Assignment