NET PRESENT VALUE (NPV)

What is the use of NPV?

All are the method use to evaluate a project value EXCEPT

• The Profitability Index

• IRR

• The Payback Rule

• CAPM

Internal Rate of Return (IRR) is similar to opportunity cost. True or False?

• True

• False

Choose one proposal do you think the best for your corporation.

Project A : IRR (14.29%), NPV @7% ($23,832)

or

Project B : IRR (12.56%), NPV @7% ($57,942)

• Project A

• Project B

Which project will you choose? Suppose your firm is limited to spending $10 million

Project A : C_0 (-10), NPV @10% (21.40), Profitability Index (2.1)

Project B : C_0 (-5), NPV @10% (16.07), Profitability Index (3.2)

Project C : C_0 (-5), NPV @10% (11.94), Profitability Index (2.4)

• Project A

• Project B

• Project C

• Project B & Project C