Question

Quantitative Analysis for Managers

Why is it important to know the internal rate of return and the hurdle rate? What is the difference in cash flow and profit? Why go to the trouble of determining the present value for any decision which flows into multi-periods?

Answer 1

Internal rate of return is the part of financial planning that which was used to find out the profits from the invested amount. Internal rate of return is a concession rate that which makes the net present value of all financial transactions from certain work is equal to zero. This method was used to know different methods of projects. In some cases project will be rejected where internal rate of return falls down. Hurdle rate is a kind of profit that which was been expected by the investors or managers when they invested in any project. Minimum hurdle rate is the organizations invested amounts.

Cash flow is the movement of money in and out of a business or organization to carry out the required work. Profits are the long term income where organizations come across the financial gain from the invested amounts.

While taking decisions for any aspect in the organization basic kind of investment should be required for the evaluation. Finding the present value will be some trouble for the organization. Sometimes organization’s best things cannot be found out from the budgetary proclamations. Organization always tends to create and offer the plead items and this is the method where money will be rotated in the organization.