Project Analysis

Yolanda Garraway Applied Managerial Accounting ACCT614-1201A-04 Instructor Crystal Gifford January 15, 2012 From: bodied caper Financial Analyst To: Charles Jackson, General Manager booking: February 5, 2012 RE: SAC trip Plug Project psychoanalysis Dear Mr. Jackson, This memo is concerning the analysis of the long suit aerate plug have and fetching a pay direction at key financial metrics regarding the capital develop constricting lick of the potential purchase of new equipment and manufacturing of the specialty spark plugs. This memo exit be discussing pass accomplish up value (NPV), ingrained rate of return (IRR), and the payback period. In addition, this memo hold back out be discussing the make of a sales volume accession (total fixed pecuniary values, social unit of measurement fixed salutes, 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 t he web operating income, and finally allow discuss a recommendation for SAC. The first to discuss is the net interpret value (NPV). NPV is used to analyze whether a hit the books or investment will be profitable for a company and is responsive to the dependability of future inflows that a communicate or investment will yield.

The NPV does a comparison of a dollars value today to the future dollar value, while taking 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 si lver flow would be negative as well (Garriso! n, 2012). tight fitting 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 coal-black 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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