After a company has made an investment in a capital asset, what will it conduct to compare the actual net cash inflows to the projected net cash inflows?

Respuesta :

Company will conduct net present value, accounting rate of return and payback period to compare the actual net cash inflows to the projected net cash inflows.

What is net present value?

Net present value (NPV) is used to calculate the current value of a future stream of payments from a company, project, or investment. To calculate NPV, you need to estimate the timing and amount of future cash flows and pick a discount rate equal to the minimum acceptable rate of return.

What is accounting rate of return (ARR)?

The accounting rate of return (ARR) is a formula that reflects the percentage rate of return expected on an investment or asset, compared to the initial investment's cost.

What is payback period?

Payback period is defined as the number of years required to recover the original cash investment. In other words, it is the period of time at the end of which a machine, facility, or other investment has produced sufficient net revenue to recover its investment costs.

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