Questions and Answers on Project Management and Decision Making - Paper Example

55,000 43,000 According to the accounting rate of return, project should be rejected because it does not does not generate an internal rate of return higher than the cost of capital.

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Payback period

Payback period measures the time taken by a project to generate cash flow that will cover the initial capital investment. It is calculated by dividing the initial capital outlay with the annual cash flow as shown in the table below.

Net present value

NPV seeks to establish the differences between cash inflow and cash outflow as shown in the table below.

5,000 2,800 cash flow cash flow 2800 1 1100 1 860 2 1100 2 860 3 1100 3 860 4 1100 4 860 chose Bangalore because it has the highest net present value

5 1100 5 860 6 1100 6 860 7 1100 7 860 8 1100 8 860 9 1100 9 860 10 1100 10 860 11 1100 11 860 12 1100 12 860 13 1100 13 860 14 1100 14 860 15 1100 15 860 16 1100 16 860 17 1100 17 860 18 1100 18 860 19 1100 19 860 20 1100 20 860 $10,041.40 $7,850.55 net present value $5,041.40 $5,050.55 Internal rate of return IRR

IRR refer to the rate at which NPV is zero. The project with the highest IRR should be selected as show below.

Question 2

There are many non-financial factors that might affected the viability of this projects including language, culture, government regulation, lack of skilled labor and lack of adequate raw material. Language barrier is one of the main factors that might affect the success of these projects. If managers cannot communicate effectively with local employees, it will be difficult to implement the project. Moreover, if the cultural value of the company and management does not match with those of Indians including the product they are manufacturing, there is high chance that the customers will not buy the product.

Changes in government regulations can significantly impede the ability of the business to conduct business. For instance, if the government restricts activities of foreign companies in these cities, it will have a direct impact on the performance of the project.

Lack of skilled labor in India will affect the ability of the business to manufacture toaster. If the company decides to outsource from other parts of the world, it might be expensive for the business. Similarly, if there is not adequate raw material in India, Garrison application Inc. manufacturing process will be affected negatively (Masini & Menichetti, 2013).

Question 3

Garrison Application Inc. should implement the project in Bangalore because it has the highest net present value. This implies that the project will generate the high returns in Bangalore compared to Mumbai. Moreover, Bangalore has a short payback period compared to Mumbai.

References

Masini, A., & Menichetti, E. (2013). Investment decisions in the renewable energy sector: An analysis of non-financial drivers. Technological Forecasting and Social Change, 80(3), 510-524.

Zimmerman, J. L. (2014). Accounting for decision making and control (8th ed.). New York, NY: McGraw-Hill.