Presentation Case 4 speech

Presentation Case 4 speech - Presentation Case 4 - Speech...

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Presentation Case 4 - Speech Slides 1 to 2 : What is a mutually exclusive project? A mutually exclusive project is where the acceptance to do or participate in one project eliminates the possibility of the other project being accepted or undertaken as well. In this case, Gargorium Ltd, must decide whether to undertake the expansion of either Nursery A or Nursery B, but not both. Slide 3: Define the term Net Present Value (NPV)? Net Present Value is defined as the difference between the initial costs of an investment project, and the sum of current values of projected cash inflows. It is used to determine whether an investment is worth pursuing and likely to offer good returns, that is, the rate of return is greater than the discount or interest rate used to determine the current values of future cash flows. In this case, the Net Present Value is equal to the sum of the present values of the future cash flows given, minus the initial cost of expanding each nursery. Basically, the NPV is higher if: the income amounts (cash flows in) are larger, or if the discount rate is lower. The NPV is lower if the income amounts (cash flows in) are smaller, or if the discount rate is higher Slides 4 to 5: What is the NPV decision rule? If the value of the NPV is greater than zero then the project is worthwhile pursuing. If the NPV value is less than zero, then the project should not be pursued as it represents a monetary loss to the organisation. In cases where the NPV equals zero, it is up to
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This note was uploaded on 11/09/2011 for the course BUS ECO 101 taught by Professor Nguyen during the Three '11 term at Monash.

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Presentation Case 4 speech - Presentation Case 4 - Speech...

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