Clark Paint may consider accepting this device if the expected returns are
more than the live of capital. Clark Paint may consider rejecting this proposal
if the expected returns are lower than the cost of capital. A few tools used to
assist in the closing making includes the pay-back period, Net Present repute
(NPV) method and the internal Rate of reach (IRR) method. Utilizing these
tools to make the decision to accept or reject a project or proposal is st vagabondgic
because if the company accepts the project or proposal, it is likely that they go away
dress heavily.
Pay Back Period is used to assist a manager in determining the length of time
it result take to recover the initial investment.
Initial Investment of $200,000 will be recouped by Clark Paint in about
3.43years. Therefore, I believe as an initial step the proposal is believably
good to accept because funds will be recouped in 3.43years.
Net Present Value (NPV) determines whether the project is an acceptable
investment. If the NPV is a positive number, it is normally certain because it
promises a return great than the required rate of return. If the NPV is negative,
it is usually denied because it promises a return lesser than the required rate of
return.
Sometimes a negative NPV is accepted based on other factors.
The Net Present Value for Clark Paint is $33,035, therefore the proposal
may be considered acceptable.
inborn Rate of Return (IRR) represents the rate of return promised by a
project or proposal over its useful life. When evaluating a project or proposal, the
higher the Internal Rate of Return the more desirable the project. If the internal
rate of return is gibe to or greater than the required rate of return, then it is
usually accepted. If the internal rate of return is less than the required rate of
return, then it is usually rejected.
The IRR in this project is 18% and...If you desire to get a full essay, order it on our website: Orderessay
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