narrative analyisis Case Solution
The related project illustrates the use of capital budgeting process in which various companies’ data have been assessed. Under the particular scenario, it shows that various factors are identified such as NVP, IRR and return on investment to judge the project’s performance. On the other side, a comparative analysis indicates the differences in performance criteria of each project. In the process to generate results, it is determined that total costs of each project areprojected by the use of historical data. However, these costs would then be minimizedby anincrease in the cost savings of each of the selected project. The cash flows are then generated through minimizing the overall savings with the total costs associated in all the expected years. Under each plan, the negative cash flows can be seen in the first two years, but it converted into inflows afterwards.
So, it seems that every project generating the return on investment (Divide the total cost savings with total costs associated with the project execution) shows the results differently. Moreover, the results also indicate payback periods, which is the entireduration for recovery of the initial costs or eliminate outflows. Net present value is the value of each project at the end of the selected period. Thus, it shows the total value of the project that would allow assessing the valuation criteria of each deliverable.
The IRR represents the internal rate of return which is the net gain of each capital budgeting process. The rate also defines the return on the particular investment that would enable the company to judge the project’s feasibility criteria. So, it is concluded that with the appropriate results, every project can be assessedby the expected performance measure and compared with other peer companies that follow the same pattern to assess the project with the same projectedyears. Pam Peacock Financials shows better results as compared to other projects, due to its low costs associated with the project. It also shows high IRR and return on investment related to the peer companies. Thus, it is considered that other companies would generate less value from the projects as compared to the selected one..............................................................
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