Lockheed Tri Star and Capital Budgeting Case Analysis

Jun 18th, 2015
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Albany State University
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Professor Gupta, many organizations use financial methods to determine the viability of projects and decisions based in the initial required investment. The financial industry has many standards regarding these methods, with the most commonly used being Internal Rate of Return (IRR) and Net Present Value (NPV). Each method encompasses positives and negatives; however if either are used without fully understanding what their prospective results reveal, mistakes can be made and under-estimations of return will happen. In a recent case Lockheed Martin chose to use the Internal Rate of Return to value their Tri Star project. We have determined this to be a mistake and, through this case analysis, will show where the mistake happened. We also intend to explain how using the Net Present Value method will uncover a different, more realistic picture of the project’s return.

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