Assignment Writing Help on Net Present Value and Internal Rate of Return

Net Present Value and Internal Rate of Return

            Business ventures’ net present value (NPV) refers to their differences between the current value of net cash inflows and total cash out flows. Organizations use the NPV to find out the most profitable business project that they can venture in by looking at the opportunity whose NPV is higher. Firms refrain from any business negotiation with a low NPV because such projects are likely to fail. A proper net present value in any business is one that presents a positive value. From the given data, the project that has the highest net present value is project B, with $9.32 million. Therefore, the company should invest in this business venture since it will give a positive value after forecasting future values of the business operation. From a mathematical point of view, the net present value of project B would be $9.32 − $9.00 = $0.32, a positive value that denotes a profitable project.

The internal rate of return of a business represents the debt value used by most business organizations to ensure that all their net profit values change to zero. Daily knowledge of capital budgeting indicates that the higher the IRR of a business, the more desirable the project. Hence, in this venture, the business should consider investing in project B since it also has a higher IRR. Therefore, in order to choose the most profitable project for the business, the manager needs to take a keen look at the NPV and IRR and conduct the necessary calculations and comparisons between the projects. The managers should compute the values for each business and pick the one that has a positive value for the NPV and the highest value for the IRR.