350 word rewriting

Name

Institution

Date

Business firms do their best to ensure that they are investing in the projects that they are going to generate the best results at the end of the accounting period. The managers of the firms will have to consider different kinds of the potential investment so that they calculate the best project to invest so that the final profit that is generated will be high. There are techniques that are going to be used to calculate the best investment to be used. These formulas include internal rate of return, payback method and net present values of the projected accumulated values after a given time.

The use of internal rate of return, net present value and payback method is mainly to determine the best investment for the accounting year. Internal rate of return is where internal factors are the ones that are considered. This is a metric used in the capital budgeting measurement and the profitability of the potential investment. It is a discount rate that is making the net present values of all cash flows from a particular project to be equal to zero (U.S. General Services Administration, 2014).

Advantages

With the net present value, the advantages is that it is direct measure that is used to measure the funds contribution to the stockholders. The advantages of the internal rate of return is that it is showing the return on the original money that is invested in the accounting period. on the other hand, the disadvantage of the payback period is that is simple to calculate and also it is considering all the accumulated that is collected during the business period (Office of The Federal Register, 2014).

Disadvantages

The disadvantage of the net present value is that the size of the project is not measured. The disadvantage of internal rate of return is that at time times, it can give conflicting results when it is compared with the net present values for the mutually exclusive projects. The payback method has disadvantage in that it does not consider the time after the time in which calculation is done (Office of The Federal Register, 2014).

References Office of The Federal Register, E. b. (2014). Title 5 Administrative Personnel Parts 700 to 1199 (Revised as of January 1, 2014): 05-CFR-Vol-2. IntraWEB, LLC. U.S. General Services Administration, N. A. (2014). Code of Federal Regulations.