21723 1039 am topic week 4 discussion

2/17/23, 10:39 AM Topic: Week 4 Discussion
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a payback period analysis, the accounting rate of return, and the internal rate of return
(Kluwer, W. 2020). I've also found that when choosing between competing projects, an
analyst would likely decide it's better to invest in a project that has a shorter payback
period than others with longer payback periods because they're less risky. Essentially,
while I think NPV is critical and should always be used, there are several other factors as
well that project investment analysts need to look at to evaluate the entire picture. The
other methods I described would definitely come in handy when evaluating several
different projects that all have similar NPVs to decide which would be the best to invest in.
Reference:
Kluwer, W. (2020, June 11). Financial Analysis of Major Projects. Back to the top.
Retrieved February 3, 2023, from -
insights/financial-analysis-of-major-projects
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Saiprakash Reddy Palle
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Feb 1, 2023
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Greetings,
You should ensure that any major project you undertake has fewer overall costs than it has
total benefits. If you add up the costs over the next few years, then you could compare that with
the increase in revenue and cost savings you expect. Nonetheless, if you did so, you'd be
overlooking the fact that many costs will arise early in the project while many revenues or cost
savings will accumulate later. A number of methods can be used to determine the cost and
benefit of a project.
Payback Period:
This measure of investment risk is used to determine the time it will take for the net initial
investment in a project to recoup in terms of net cash inflows. The time value of money as well
as the net cash flow after the initial investment are not considered when assessing the risk of
investments with a shorter payback period.
Accounting Rate of Return

2/17/23, 10:39 AM Topic: Week 4 Discussion
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Edited by Saiprakash Reddy Palle
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on Feb 1 at 9:38pm
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ARR calculates the return on a project by dividing the annual net income by the initial
investment. For example, say you wish to buy a piece of equipment for $1 million. It is important
to consider the annual net income generated by the equipment when comparing projects. If the
equipment generates $80,000 in
net income annually, the project would have an annual return rate of 8%. As a result of its
simplicity, ARR is often used for project appraisal, but it leaves out a number of important
aspects.