Finance and Growth Strategies Assignment Example | Topics and Well Written Essays - 3500 words

Finance and Growth St rangegies - Assignment ExampleThe internal rate of return is the cost of capital that willing equate the present value of future cash flows to zero. In other words, it is the involve rate of return which will yield a zero NPV. Thus, equation 1 can be modified such that NPV is replaced by 0. NPV calculations can be done manually scarcely the process is tedious as it requires calculating the NPV by using different values of cost of capital. Another is the use of software like Microsoft Excel to contribute a more accurate figure.The decision about whether the project should be accepted or not will be based on the results of the financial and strategic analyses using techniques like NPV and IRR. In using NPV as a tool, the general rule is to accept projects or investments which generates a positive NPV while rejecting those which yields nix NPV. The result of the NPV has a direct implication on the value of IRR relative to the required rate of return. Accordin gly, a project is pursued if the IRR is equal to or higher(prenominal) than the required rate of return. In contrast, a project with a lower IRR than the cost of capital is turned down. It should be noted that a positive NPV is significative of an IRR which is higher than the required rate of return.Accordingly, a project is pursued if the IRR is equal to or higher than the required rate of return. In contrast, a project with a lower IRR than the cost of capital is turned down. It should be noted that a positive NPV is indicative of an IRR which is higher than the required rate of return.The project considered by Fujisawa, which is the magnification of its product line should be accepted based on the quantitative analyses using NPV and IRR techniques. The investment yields a relatively high NPV of 9,235,200. The IRR of 33.996% is very high compared to the required rate of return of 9%. Thus, Fujisawa will reap higher benefits than its capital outlay in the proposed project.However , it should as well as be noted that quantitative analyses are oftentimes not enough in ascertaining whether an investment should be pursued or not. Though expansion of the product is quantitatively profitable, qualitative factors like consumer demand and others should also be taken into account.