Futronics Essay

626 Words3 Pages
Calculate the net present value, internal rate of return, and simple payback. Next, determine the effect that each of the three (3) values will have on the company. Founded in 1937, Futronics Inc. has been providing reliable communications services for well over half a century and the net present value would account for time value of money. Given the information, the NPV is 101,890.80 with the internal rate of return of 13.16% can be paid back over 2.67 years. Considering the time value of money is important when evaluating projects with different costs, different cash flows, and different service lives. Both methods of evaluating long-term investments, NPV and IRR, focus on the amount of cash flows and when the cash flows occur.. For the purpose of making NPV and IRR calculations, managers typically use the time period when the cash flow occurs. An investment project with a short payback period promises the quick inflow of cash. It is therefore, a useful capital budgeting method for cash poor firms. A project with short payback period can improve the liquidity position of the business quickly. The payback period is important for the firms for which liquidity is very important. Explain one to two (1-2) investment gains that the company could achieve by outsourcing the central office functions. Focus on the company’s potential to reduce overhead and still maintain or even improve the quality of its products Discuss one (1) capital budgeting method that would be most effective for the company. Net Present Value, or NPV, combines two concepts of value. First, it determines how much cash will flow in as a result of the investment, and compares that against the cash that will flow out in order to make the investment. Since these flows take place over time, and often the investment will pay off much later, we also take into account the present and future value of

More about Futronics Essay

Open Document