Corporate Finance : Assignment Sample

CORPORATE
FINANCE
STUDENT ID:
[Pick the date]

Introduction
The objective of the given report is to analyse the given project with the use of suitable
capital budgeting techniques such as NPV, IRR and payback period. Using these techniques
and the information of the projected cash flows associated with the project, the financial
viability of the project can be ascertained. The application of the various capital budgeting
techniques to the given project is indicated below.
NPV (Net Present value)
The net present value for the project has been computed using the 10% discount rate taking
into consideration the expected cash over during the project years. The computation is
indicated below.
From the above computations, it is apparent that the NPV for the project is $42,348. Since the
NPV of the project is positive, hence it implies that the given project is acceptable in regards
to this criterion. This is because such a project would increase the shareholders’ wealth owing
to present value of cash inflows being more than corresponding value of cash outflows
(Damodaran, 2010).
IRR (Internal Rate of Return)
The IRR is defined as that discount rate for which the NPV of the underlying project becomes
equal to zero. The IRR computation for the given project is indicated below.