ACCCB543_Comp1_Mod2_Reflection.docx Comp 1/Module 2 - Reflection University of Phoenix ACCCB/543: Managerial Accounting and Legal Aspects of Business Comp 1/Module 2 “ Reflection Evaluating different potential cap
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ACCCB543_Comp1_Mod2_Reflection.docx Comp 1/Module 2 - Reflection University of Phoenix ACCCB/543: Managerial Accounting and Legal Aspects of Business Comp 1/Module 2 “ Reflection Evaluating different potential capital investments is very important for managers today, especially with the exponential growth in technology integration into most process. These assets and accompanying solutions can vary drastically in scale and scope making selection much more difficult. Capital investments are long term operational assets making this process critical. One of the first considerations when evaluating capital assets is the time value of money. The current value of money today is less than that same money in the future. This is due to the investment opportunity of money, future risk of return, and normal inflation over time. Three methods that can be used to analyze investments are the net present value, internal rate of return, and the payback method. Each has its own advantages and disadvantages. Net Present Value Net present value (NPV) indicates the return on an investment. It is calculated by subtracting the total cost of an investment from the present value of future cash inflows it will generate. It is important to use the present value of the inflows since the value of that money will not be the same now as it is in the future. Generally, if the investment returns a positive number for the NPV it is a good investment and it should be rejected if a negative number is returned. This method is advantageo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. .. . . . . . . . . . . . . . . . . . .. . . . .
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