Thursday, November 21, 2019

PROJECT MANAGEMENT Essay Example | Topics and Well Written Essays - 250 words

PROJECT MANAGEMENT - Essay Example quation for break-even point with the consideration of NPV is expressed as, 0 = -$200,000,000 + (Sum of all PV Factors) x $25,000,000 (â€Å"Definition of Net Present Value†). From this equation, Sum of all PV Factors = 200,000,000 / 25,000,000 = 8. The PV Factor for each year is calculated using formula, 1/(1+r)^n. In this formula, r = 13%, and n = number of years, such as 1,2,3 †¦Ã¢â‚¬ ¦., and so on. The sum of PV factors at r = 13% for 70 years is equal to 7.69, and NPV = -7,721,304. It can be concluded that Break-even point with NPV for Alpha project is much longer than 70 years. The sum of all PV Factors for the project Zeta is calculated, Sum of all PV Factors = 500,000,000 / 70,000,000 = 7.1428. The sum of all PV Factors for the yearly return 13% in 25 years is equal to 7.1695. It is concluded that Break-even points of Zeta project is in between 24 and 25 years. Answer to Question 7. Big Lu is using NPV criterion that is based on the discounted cash flow concept. It implies that annual income for each year will be discounted to the present value. If the Net Present Value is positive then the investment project is accepted. This is an industry accepted method; that is why Big LU investment criteria is

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