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Ig009 B Akindeji

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Running head: ACCOUNTING TOOLS 1 Assessment on Accounting Tools and Measures- IG009 Akindeji Babatunde Accounting for Management Decision Making (WMBA 6050) Dr. Pamela Legner WALDEN UNIVERSITY July 08, 2019 ACCOUNTING TOOLS 2 Accounting Tools and Measures Part II: Making Investment Decisions Prior to making an investment decision, it is imperative to conduct different project evaluation with an objective of establishing the most viable investment from a portfolio of projects. To do this, as an investor, one could evaluate the different investments net present value (NPV), internal rate of return (IRR) as well as payback period that it would take for an enterprise to become profitable (Kerzner, 2017). Calculations Net Present Value The table below reveals the calculated net present values for investments A and B. Net Present Value Years 0 1 2 3 4 5 Investment A ($50,000) $20,000 $20,000 $20,000 $20,000 $20,000 Net present Value Present Investment Value B Present Value ($50,000) ($150,000) ($150,000) $18,182 $56,000 $50,909 $16,529 $56,000 $46,281 $15,026 $56,000 $42,074 $13,660 $56,000 $38,249 $12,418 $56,000 $34,772 $25,816 $62,284 From the table, the NPV for investment A is $ 25,816 while the NPV for Investment B is $62, 284. Notably, NPV is more preferred over the other methods because it reveals the amount of income that a project would generate. ACCOUNTING TOOLS 3 Accounting Rate of Return Since the projects have equal net cash inflows, the ARR (ROI) for In ...
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