ignature Assignment: Net Present Value And Internal Rate Of Return

  1. For this assignment, refer to the scenario located in “Problems – Series A” section 10-19A of Ch. 10, “Planning for Capital Investments” of Fundamental Managerial Accounting Concepts. This scenario puts you at task as a Senior Accountant for Donovan Enterprises to identify the preferred method and best investment opportunity for the company.

    Read the scenario in the textbook and complete the activity below.

    Use Excel®—showing all work and formulas—to compute the following:

    • Compute the net present value of each project. Round your computations to 2 decimal points.
    • Compute the approximate internal rate of return for each project. Round your rates to 6 decimal points
    • Create a PowerPoint® presentation showing the comparison of the net present value approach with the internal rate of return approach calculated above. Complete the following in your presentation:
    • Analyze the results of the net present value calculations and the significance of these results, supported with examples.
    • Determine which project should be adopted based on the net present value approach and provide rationale for your decision.
    • Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples.
    • Determine which project should be adopted based on the internal rate of return approach and provide rationale for your decision.
    • Determine the preferred method in the given circumstances and provide reasoning and details to support the method selected.
    • Synthesize results of analyses and computations to determine the best investment opportunity to recommend to the president of Donovan Enterprises.
    • Cite references to support your assignment.

      Format your citations according to APA guidelines.

      Submit the Excel spreadsheet along with the presentation.

******** Problem 10-19A This is the scenario BELOW******

Dwight Donovan, the president of the Donovan Enterprise, is considering 2 investment opportunities.  Because of limited resources, he will be able to only invest in one of them.  Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no savage value.  Project B supports a training program that will improve the skills of employees operating the current equipment.  Initial cash expenditures for Project A are $400,000 and for Project B are $160,000.  The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next 4 years.  Donovan’s Enterprise desired rate of return is 8 percent.