Project management/Capital Budgeting Management Coursework

Project Management/Capital Budgeting
Name
Institutional Affiliation
Project Management/Capital Budgeting
Net Present Value (NPV)
Milner (n.d.) defines NPV as the difference between a project’s market value in today’s dollars its current cost in today’s dollars. It measures the value created when one decides to undertake an investment. Since the goal of financial management is to increase the wealth of the firm while at the same time competing in the market, the project undertaken should attract a positive NPV from the market. As a result, computation of NPV will yield both positive and negative values but the management should only opt for a project with a positive NPV even if the projects with negative NPVs are pleasant to the eye to undertake. The value of the project is what matters to the management undertaking a financial investment decision.


From the NPV analysis above, the project worthy investment is the one with a positive NPV. Project C is worthy investment because its NPV is positive and stands at $20,093. The company should go ahead and invest in this project because the expected returns outrun the costs that the firm has pumped in the project.
Payback Period
According to Rashid (2017), they payback period is the time required for a project to repay the amount invested in it. The company should only invest in a project that will repay the amount invested within the shortest time possible. In the analysis below, one finds that project C is the only one with the shortest time of repaying the amount that the firm has invested in it. This is advantageous because the firm will recoup the invested funds within a short time and may consider reinvesting in another project. Additionally, there is increased confidence in the project and the...