ASSIGNMENT TOPIC: “THE ADVANTAGES AND DISADVANTAGES OF USINFG NPV (NET PRESENT VALUE) AND IRR (INTERNAL RATE OF RETURN)” NPV (NET PRESENT VALUE) The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. NPV compares the value of a dollar today to the value of that
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NPV Versus IRR W.L. Silber I. Our favorite project A has the following cash flows: -1000 0 0 1 0 2 +300 3 +600 4 +900 5 We know that if the cost of capital is 18 percent we reject the project because the net present value is negative: - 1000 + 300 600 900 + + = NPV 3 4 (1.18) (1.18) (1.18)5 - 1000 + 182.59 + 309.47 + 393.40 = -114.54 We also know that at a cost of capital of 8% we accept the project because the net present value is positive: - 1000 + 300 600 900
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present value the net present value (NPV) or net present worth (NPW)[of a time series of cash flows‚ both incoming and outgoing‚ is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price‚ the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash
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QUESTION 2 a) What is the time value of money? flows? b) What factors need to be taken into account when choosing an appropriate discount rate? c) What do you understand by the terms (i) “net present value” (NPV) and (ii) “internal rate of return” (IRR)? d) Compare and contrast the NPV and IRR. Why is it important to “discount” future cash CONTENTS PART ONE: QUESTION 1 1. INTRODUCTION . 2. RISK 2.1 2.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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TARGET CORPORATION Introduction The Target Bulls-eye logo has become instantly recognizable and synonymous with high quality and style at affordable prices. From its origins in 1902 as The Dayton Dry Goods Company in Minneapolis‚ Minnesota to the opening of the first Target store in 1962 in Roseville‚ Minnesota‚ Target Corporation has grown into one of top five retailers in the United States today with over 1‚600 stores and 350‚000 employees. Total revenues and net earnings for 2008 reached
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Company Profile and History Target Corporation is an upscale discounter providing high quality‚ on-trend merchandise at attractive prices in a clean‚ spacious and guest friendly store. Target Corporation also operates their online business at Target.com . According to the company’ history report Target began as Marshall Field & Co in 1881 then in 1902 George Dayton opened a Goodfellows in downtown Minneapolis. One year later they founded their first Dry Goods Store and in 1911 they became known
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| Target Corporation | Memo To: Dr. Brian Boscaljon From: Adam Leone and Jean Costa CC: Doug Scovanner‚ CFO Date: [ 2/14/2011 ] Re: November Meeting Capital Budgeting Decisions The Objective As the November Meeting approaches‚ CFO Doug Scovanner is faced with the problem of choosing which of the five controversial projects available to accept. Our task is to assume this role and evaluate each of the projects based upon two major criteria. The first is determining the firm’s financial motives
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MGT 6060 SPRING SEMESTER‚ 2013 CASE #2 – TARGET CORP Group: Blake West Daeyoun Bae Charles Scott Ahmed Sattar Alex Harkey #1: Target’s Capital budgeting system Target Corporation uses an interesting capital-budgeting system. Projects are proposed using Capital Project Requests (CPRs) and must be approved before money can be spent. The level of approval needed depends on the amount being requested. For projects requiring less than $100K‚ lower management can
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NPV is short for Net Present Value and it makes difference between the present value and cost of a project. In addition‚ NPV takes into account all cash flows through out the whole life of the projects‚ as well as the time value of money. And it compares like with like as all inflows and outflows are discounted to today¡¯s date. Also‚ the cost of capital is very unlikely to be changed over a period of time. To judge if the NPV is good‚ we should see the value of it‚ and the rule is the high the better
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Janice Miller American Intercontinental University Managerial Accounting 310 Instructor: Matt Keogh Introduction “Net Present Value (NPV) is the present value of the net cash inflows generated by a project including salvage value‚ if any‚ less the initial investment on the project‚” (Irfanullah‚ Jan.‚ 2013). It is preferred as one of the most reliable measures employed in capital budgeting since it accounts for the time value of money as it uses the discounted cash inflows. The net cash
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