Capital Budgeting Data A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items: 1. The net present value (NPV) of the project 2. The...

1 answer below »
Capital Budgeting Data A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items: 1. The net present value (NPV) of the project 2. The internal rate of return (IRR) of the project B. What are the implications of these calculations? In other words, based on each of the calculations, and being mindful of the need to balance portfolio risk with return, would you recommend that the company pursue the investment? Why or why not? Be sure to substantiate your claims.C. What is the difference between NPV and IRR? Which one would you choose for evaluating a potential investment and why? Be sure to support your reasoning with evidence.

Guidelines for Submission: Your paper must be submitted as a 2- to 3-page Microsoft Word document, not including your calculations, which should be completed on the designated tab in the Final Project

https://www.sec.gov/Archives/edgar/data/354950/000035495015000008/hd-212015x10xk.htmlink for data for the case study; complete attached excel spreadsheet for calculations Tab 3 - Capital Budgeting
Answered Same DayOct 10, 2019

Answer To: Capital Budgeting Data A. Suppose the company is considering a potential investment project to add...

David answered on Nov 30 2019
136 Votes
Capital Budgeting – Home Depot
Part A: Calculation of NPV and IRR
Using the excel formula, Calculating the NPV a
nd IRR
NPV = PV of cash flows – Initial investment
IRR is calculated using the excel formula
IRR(Cash flows)
The NPV of the project using the rate of 12% is $377.14 whereas the IRR of the project is 22.17%.
Part B: Company should go ahead with the project
Capital budgeting can be defined as a process which helps the firm to invest the funds efficiently in long term projects; the investment in long term projects is made in expectation of the positive cash flows in future and capital budgeting techniques help in determining it.
Projects with longer life and huge capital investment are usually analyzed very carefully by using various capital budgeting techniques such as NPV, IRR, and Pay-back etc. NPV and IRR are two capital budgeting techniques that are mostly used to evaluate the projects. Usually the result provided by both of them is same but in some cases the result provided by NPV can differ from result provided by IRR.
NPV and IRR of the project
In the given case, we have assumed that Home Depot is...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers