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Unformatted text preview: company is using the net present value method (NPV), the internal rate of return method (IRR), annual rate of return method, or payback period method in its capital budgeting analysis. Take examples for NPV and IRR methods. When the net present value method is used, the cost of capital becomes the discount rate used to compute the net present value of a proposed project. Any project yielding a negative net present value is screened out and rejected. On the other hand, when the internal rate of return method is used, the cost of capital takes the form of a hurdle rate that a project must clear for acceptance. If the internal rate of return on a project is not great enough to clear the cost of capital hurdle, then the project is rejected....
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This note was uploaded on 02/01/2012 for the course ACCT ACC560 taught by Professor Lorij.perez during the Spring '10 term at Strayer.
- Spring '10
- Managerial Accounting