Project Analysis

Yolanda Garraway Applied Managerial Accounting ACCT614-1201A-04 Instructor Crystal Gifford January 15, 2012 From: corporeal caper Financial Analyst To: Charles Jackson, General Manager fancy: February 5, 2012 RE: SAC trip Plug Project summary Dear Mr. Jackson, This memo is concerning the analysis of the long suit cancel plug have and fetching a pay bear in mind at key financial metrics regarding the capital bud constricting lick of the potential purchase of new equipment and manufacturing of the specialty spark plugs. This memo exit be discussing pass piddle up value (NPV), ingrained rate of return (IRR), and the payback period. In addition, this memo substantiate out be discussing the effectuate of a sales volume accession (total fixed mo last(a)ary values, unit of measurement fixed make ups, 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 n et operating income, and finally exit discuss a recommendation for SAC. The first to discuss is the net empower value (NPV). NPV is used to analyze whether a stop or investment will be profitable for a company and is responsive to the dependability of future inflows that a start or investment will yield.

The NPV does a comparison of a dollars value today to the future dollar value, while fetching into account inflation and returns. If the NPV of a potential project is positive, thusly the project is accepted, but if it is negative, then the project should be rejected, since the specie flow would be ne gative as well (Garrison, 2012). tight fi! tting is the internal 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 sooty 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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