Target Corporation Capital Expenditure Committee

In modern corporations, various projects compete for the same source of capital allocated for new investments. In preparing an analysis for a Capital Expenditure Committee, the two most important predictive financial metrics used are Net Present Value (NPV) and Internal Rate of Return (IRR). NPV is the present value of the project's cash inflows minus the present value of the project's cash outflows. It indicates the expected impact of the project on the value of the firm. A positive NPV increases the value of the firm. When comparing among mutually exclusive projects, the highest NPV is key in decision making. The IRR is that discount or interest rate which will cause the present value of all future cash flows to equal the incremental investment. In other words, it's the discount rate at which the NPV of a project eventually equals zero. All projects with an...
[ View Full Essay]