Demonstrate the link between net present value and internal rate of return and how they may be used in conjunction with one another to evaluate investments
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Demonstrate the link between
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- (b) Explain the relationship between net present value and internal rate of return, and show how they may offer complementary methods for evaluating investments.Explain the meaning and composition of the "return" of a financial investment.Explain what is meant by Accounting Rate of Return (ARR) and Net Present Value (NPV) in the context of investment appraisal. Discuss at least TWO advantages and TWO disadvantages of each method.
- Describe the affects of the present value of an investment.Discuss how the Accounting Rate of Return as an investment appraisal method is better than the Net Present Value method.why net present value is considered to be superior to internal rate of return as an investment appraisal method? Critically evaluate and give an example if possible
- Explain how the cost of capital serves as a screening tool when using (a) the net present value method and (b) the internal rate of return method.Which approach to investment analysis is "best" in terms of accounting for both the timing and amount of revenue streams from a potential investment? A. the payback period B. the simple rate of return C. the net present value D. the internal rate of returnhow the cost of capital serves as a screening tool when dealing with the net present value method and the internal rate of return method.