Why do you think business schools historically have mainly taught NPV even though IRR has been shown to be more popular?
NPV is best method because it gives
accurate results in independent s well as mutually exclusive
projects, includes time value, calculates for the entire project.
The discount rate is WACC which can be practically calculated
through capital structure of the firm.
There are certain disadvantages of IRR which are overcome by
NPV
Disadvantagesof IRR
1. Is not good for acceptability with large scale projects where it
might be rejected when comparing with small scale project if IRR is
higher.
2. IRR and NPV may conflict in certain case where NPV rule
Prevails.
3. IRR rate is higher than WACC generally so reinvestment as higher
than WACC may not be possible always.
4. It gives multiple IRR when have more than one negative cash
flows occur in the project
NPV strengths:
1.It factors in time value of money
2. It includes risk involves in generating cash flow/.
3. It is good in evaluating project involving large investment is
of large scale projects.
4. Here reinvestment rate is discount rate or WACC which is lower
than IRR.
5. It helps in ranking between projects.
Why do you think business schools historically have mainly taught NPV even though IRR has been...
Even though it has been proved that the external benefits of medical education are likely to be inframarginal (which means that they do not affect the optimal number of health professionals seeking medical education), why do you think medical education is still highly subsidized?
Why do you think alcohol has been more popular and culturally acceptable in traditional mainstream Canadian culture compared with the other drugs discussed in the text?
Why is post-purchase evaluation by customers important to marketers even though the sale has been made?
Why do you think public schools that use “teach to the test” and standardized testing aren’t getting the results they hope for? What could they do to improve test scores based on what you have learned in this chapter and developmentally appropriate practices?
2. Later, the company is considering the purchase of machinery and equipment to set up a line to produce a combination washer-dryer. They have given you the following information to analyze the project on a 5-year timeline: Initial cash outlay is $150,000, no residual value.Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials.Direct fixed costs are estimated to run $20,750 per month.Cost of capital is 8%, and the...
Why do you think it is important for scientists to have a uniform set of units for measurements? In the past these were always linked to artifacts (like rods or bars of a given length for the meter) but more recently there has been a move to other methods to describe these units (for instance the distance traveled by light in a given period of time to delineate the meter). Why has this move been made?
Browsers have historically been a soft target for hackers. Recently Google Chrome discontinued supporting Java in an attempt to enhance security. What is your take on such a move and do you think other systems will follow Google? Why or why not?
Browsers have historically been a soft target for hackers. Recently Google Chrome discontinued supporting Java in an attempt to enhance security. What is your take on such a move and do you think other systems will follow Google? Why or why not?
Why do you think virtualization has become so popular? Discuss when and where you think virtualization would be useful, as well as cost efficient.
Why do you think marketing is necessary and helpful even if you are not pursuing marketing as a major or career? Why is marketing important to all companies, organizations? Do you think marketing benefits society?