ESSAY Accounting of the projects

Running head: ESSAY 0
accounting
FEBRUARY 7, 2019

ESSAY 1
The procedure of selection of the projects (capital projects) may need more evaluation
and the consideration. There are various methods to make evaluation of the proposal of
investment. With the help of these methods, it can be decide whether to avoid the proposed
investment or accept the proposed investment. It can be great difficulty to choose the right
method for giving ranks to the projects. The situation can be more difficult, where choices are
to be made between mutually exclusive projects (Leyman, P., & Vanhoucke, M. (2017). As
per this, the selection should be depended on the project ranking to increase the wealth of the
stakeholders. The selection of projects is based on numerous financial assessment methods.
These methods involve IRR and net present value. The NPV method is more useful in
ranking the projects. In the following parts, a net present value method is described and
critically examined.
The net present value refers to difference between present value of cash inflow and
present value of cash outflow over the time (Bora, 2015). The net present value method refers
to way of giving rank to proposed investments using NPV that is similar to present value of
upcoming net cash inflows. The net present value is useful for planning of investment and for
capital budgeting. By determining net present value, the profitability of the projects or
offered investments can be assessed. The calculation of net present value is as follows-
Here,
t = number of period