Assume that you’re a high-level executive that must make a decision as to whether or not...

Assume that you’re a high-level executive that must make a decision as to whether or not you should invest in a project that will yield positive cash flows. Assume that the investment to be made is $250,000

What methods would you employ to assist in you evaluating and making your decision.

Expert Solution

The two methods that can be used is

a) NPV

b) IRR

a) NPV method is used to see whether the discounted value of future positive cashflows are more than the initial investment. Say you decided that the Cost of Capital will be 10%, so you will discount all cash inflows with 10% and see whether the sum total of all cash inflows standing in present is more than the initial cash outflow that the company will have to incur. If the difference between Present Value of future cash inflows and Initial Cash Outflow is positive, then the NPV of the project is positive and you should accept the project. So the inflows will be more as compared to the outflows.

NPV = PV of Cash Inflows - Cash Outflow

b) IRR (Internal Rate Of Return) helps us to find a rate that makes the Present Value of Future Inflows equal to the Initial Outflow. So if that rate is more than cost of capital then the project can be accepted. It is because, your project will yield more return than you need to pay for the arrangement of the capital.

Outflow = Inflow / ( 1 + IRR)

jeff jeffy answered 2 years ago

Hand-to-Mouth is currently cash-constrained and must make a decision about whether to delay paying one of...

Hand-to-Mouth is currently cash-constrained and must make a decision about whether to delay paying one of its suppliers or taking out a loan. They owe the supplier $12,500, but the supplier will give them a 2% discount if they pay by today (when the discount period expires). That is, they can either pay $12,225 today, or $12,000 in one month when the net invoice is due. Because Hand-to-Mouth does not have the $12,250 in cash right now, it is considering...

Your startup is currently cash-constrained, and you must make a decision about whether to delay paying...

Your startup is currently cash-constrained, and you must make a decision about whether to delay paying one of its suppliers, or take out a loan. You owe the supplier $11000 with terms of 5/10 Net 40, so the supplier will give you a 5% discount if you pay today (when the discount period expires). Alternatively, you can pay the full $11000 in one month when the invoice is due. You are considering three options: Alternative A: Forgo the discount on...

Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one...

Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $ 12 comma 500 with terms of 2.4/10 Net 40, so the supplier will give them a 2.4 % discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $ 12,500 in one month when the invoice is due. H2M is considering three options:...

You’re a beer brewer and you’re interested in whether there is a relationship between the weight...

You’re a beer brewer and you’re interested in whether there is a relationship between the weight of grains used to brew the beer, and the percent alcohol of the beer. You record your data below of your homebrew. (3 points) Weight of Grains Alcohol Percentage 9.9 4.3 10.3 4.5 9.8 6.1 9.1 4.5 10.3 5.1 11.1 6.3 10.8 5.8 11.3 4.6 9.9 11.2 10.6 9.2 10.3 4.9 11.4 5.4 11.9 6.3 11.6 5.2 10.8 10 9.4 9.3 10.5 6.5 11...

Should individual states be allowed to make the decision as to whether they want to participate...

Should individual states be allowed to make the decision as to whether they want to participate in the Medicaid Expansion initiative outlined in the ACA? WHY? If you were the governor of a state what would be the specific reasons why you WOULD or WOULD NOT participate?

Assume the role of a senior level executive in your organization. There has been increased tension...

Assume the role of a senior level executive in your organization. There has been increased tension between departments due to organization wide changes brought about by a recent merger. Department heads are not getting along and are behaving in a territorial manner to protect their department’s best interests. ----------------------------------------------------------------------- Questions As a leader in your organization, how can you use your conflict management skills to bring about positive outcomes in this situation? How can your leadership skill assist you in...

For this discussion, assume the role of a business owner who has to make a decision...

For this discussion, assume the role of a business owner who has to make a decision to raise additional capital. What considerations would you evaluate relative to issuing bonds as compared with conventional financing methods? How would you reflect the bond transactions on your statement of cash flows, and how would the financial statement users use that information?

Look at this scenario. You are attempting to make a decision whether to eat out tonight...

Look at this scenario. You are attempting to make a decision whether to eat out tonight or cook. What is the process you go through to make your decision? Use the decision making process as you explain your results. Do not assume it is best to cook. It may not be depending on your meal and how many people you have to feed. Explain in 125 words with a credible resource.

One of the key questions decision makers must ask when considering whether to invest in a...

One of the key questions decision makers must ask when considering whether to invest in a new technology is “what will the return on investment (ROI) be?” In other words, will this technology pay for itself, and when? Consider an amusement park called FunTown. Funtown is a popular amusement park but because of long entrance lines to the park, yearly attendance has been flat (no increase or decrease) for the last 3 years. Unless something is done to alleviate the...

If the goal of your decision making is to make the optimum decision or make the...

If the goal of your decision making is to make the optimum decision or make the best choice, you should utilize the bounded rationality model of decision making. the intuitive decision-making model. the creative decision-making model. the rational decision making model.

Question