# Evaluate a Project Using the Three Main Tools

Sigchi4life
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Question description

Deliverable Length: 800–1,000 words

Strategic decision makers are required to be able to evaluate projects based on the long-term objectives of the firm as well as the project’s ability to earn the company additional compensation. The 3 main tools used to make this evaluation are the pay-back period, net present value (NPV), and internal rate of return (IRR).

 Year Project #1 Project #2 Project #3 0 (\$30,000) (\$32,000) (\$35,000) 1 \$11,000 \$15,000 \$11,000 2 \$11,000 \$14,000 \$11,000 3 \$11,000 \$11,000 \$11,000 4 \$11,000 \$2,000 \$11,000 5 \$11,000 \$500 \$11,000
 Scenario NPV Rate 1 5% 2 5.5% 3 6%

Using the data in the tables above, answer the following questions:

• Calculate the NPV for each project using each scenario's NPV rate. Show your work.
• Calculate the pay-back period for each project. Show your work.
• Calculate the IRR for each project. Show your work.
• Which project would the company select using the NPV method in scenario 1? Explain your answer.
• Which project would the company select using the NPV method in scenario 2? Explain your answer.
• Which project would the company select using the NPV method in scenario 3? Explain your answer.
• Which project would the company select using the pay-back period? Explain your answer.
• Which project would the company select using the IRR method? Explain your answer.

(Top Tutor) Daniel C.
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School: University of Maryland
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