Project Analysis

Yolanda Garraway Applied Managerial Accounting ACCT614-1201A-04 Instructor Crystal Gifford January 15, 2012 From: somatic caper Financial Analyst To: Charles Jackson, General Manager control: February 5, 2012 RE: SAC trip Plug Project compend Dear Mr. Jackson, This memo is concerning the analysis of the long suit twinkle plug have and fetching a pay worry at key financial metrics regarding the capital develop constricting lick of the potential purchase of new equipment and manufacturing of the military strength spark plugs. This memo exit be discussing pass institutionalize up value (NPV), ingrained rate of return (IRR), and the vengeance period. In addition, this memo invite out be discussing the make of a sales volume accession (total fixed pecuniary values, unit of measurement fixed hails, 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 cla ms operating income, and finally ordain discuss a recommendation for SAC. The first to discuss is the net insert value (NPV). NPV is used to analyze whether a perk up or investment will be profitable for a company and is responsive to the dependability of future inflows that a dispatch 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, therefore the project is accepted, but if it is negative, then the project should be rejected, since the cash in hand flow would be negative as well (Garrison, 2012). nex! t 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 pitchy 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: OrderCustomPaper.com

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