Business Finance - Management Week 10 Assignment- Account for Management Decision

2

Lakenya Campbell

Walden University

Account for Management Decision Making

Dr. Schmidt

October 19th, 2025

Organizational Performance Analysis and Recommendations—Part 1

This report analyzes two capital investment proposals; the Air Scrubbers and the Furnace Fuel Change in order to get the copper smelting enterprise in line with the new environmental laws. The Net Present Value (NPV), Internal Rate of Return (IRR), Accounting Rate of Return (ARR), and Payback Period methodologies were used in evaluating the financial performance for each proposal (Walden University, LLC, 2024c). The calculations were used to decide the most economical option.

Capital Budgeting Results Summary

The comparison made between the calculated metrics shows that the Furnace Fuel Change project is more financially viable, as it produces greater returns in all the discounted cash flow measures.

Metric	Air Scrubbers	Furnace Fuel Change
Net Present Value (NPV)	$835,256	$1,674,358
Internal Rate of Return (1RR)	14%	21%
Accounting Rate of Return (ARR)	20.00%	21.66%
Payback Period (Years)	6.00	4.40

Financial Performance Analysis and Recommendation

The analysis contributes greatly to the choice of the Furnace Fuel Change project. The main technique used to maximize the shareholder wealth is the NPV, and it yielded a positive value of $1,674,358, approximately twice that of the Air Scrubbers project (Walden University, LLC, 2024a). Moreover, the Furnace Fuel Change had an IRR of 21%, greater than the 6% capital cost, which means that the rate of return on the investment is great. Conversely, the Air Scrubbers proposal returned a lower IRR of 14%.

Besides profitability, it is important to evaluate how much time a project would take to recover the initial capital (Walden University, LLC, 2024b). The Payback Period of the Furnace Fuel Change is about 4.40 years and much lower than the 6.00 years of the Air Scrubbers. As a result, the fast recovery decreases the exposure of the company to risk and makes capital available for reinvestment at an earlier point. Although the Accounting Rate of Return is not based on the time value of money, it also prefers the Furnace fuel change at 21.66% (Franklin et al., 2019). With the dominance in all financial indicators, the Furnace Fuel Change project shall provide the maximum return, thus the best option.

References

Franklin, M., Graybeal, P., & Cooper, D. (2019). 11.5 Compare and contrast non-time value-based methods and time value-based methods in capital investment decisions. In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/11-5-compare-and-contrast-non-time-value-based-methods-and-time-value-based-methods-in-capital-investment-decisions

Walden University, LLC. (2024a). How to calculate NPV and IRR [PDF]. Walden University Canvas. https://waldenu.instructure.com

Walden University, LLC. (2024b). ARR/ROI [PDF]. Walden University Canvas. https://waldenu.instructure.com

Walden University, LLC. (2024c). Net present value, accounting rate of return, internal rate of return, and payback to make investment decisions [PDF]. Walden University Canvas. https://waldenu.instructure.com