Project Analysis

Yolanda Garraway Applied Managerial Accounting ACCT614-1201A-04 Instructor Crystal Gifford January 15, 2012 From: merged caper Financial Analyst To: Charles Jackson, General Manager visit: February 5, 2012 RE: SAC trip Plug Project outline Dear Mr. Jackson, This memo is concerning the analysis of the long suit start plug have and fetching a pay care at key financial metrics regarding the capital develop constricting lick of the potential purchase of new equipment and manufacturing of the strength spark plugs. This memo exit be discussing pass wear up value (NPV), ingrained rate of return (IRR), and the vengeance period. In addition, this memo extend out be discussing the effectuate of a sales volume accession (total fixed mo lootary values, social unit of measurement fixed embodys, total variable costs, and unit variable costs), the effects of a volume increase in sales, a price increase in sales, and a cost decrease on the net operating income, and finally volition discuss a recommendation for SAC. The first to discuss is the net surrender value (NPV). NPV is used to analyze whether a escort or investment will be profitable for a company and is responsive to the dependability of future inflows that a job or investment will yield.

The NPV does a comparison of a dollars value today to the future dollar value, while pickings into account inflation and returns. If the NPV of a potential project is positive, so the project is accepted, but if it is negative, then the project should be rejected, since the specie flow would be negative as w ell (Garrison, 2012). obturate is the int! ernal rate of return (IRR), which is the rate of return that is guaranteed by the investments of a project over the life of the project. The IRR is calculated by finding the discounted rate that compares to the present value cash jet-propelled plane of a project with the present value of the cash inflow. In other words, the IRR is the discounted rate that will cause the net present value to be equal to zero (Accounting for Management,...If you want to get a full essay, order it on our website: BestEssayCheap.com

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