Finance

[Name of the Institute]

Finance

Introduction

The following paper has two point of focus, in first part there is critical analysis in order to help a manager the basis for accepting or rejecting the ratio while in the other question the financial ratios are discussed in detail that helps in evaluation of the project. In the third part which is conclusion, the summary of both questions is disused.

Discussion

Question # 1

As a part of the management team the project should be accepted on the basis of its return on the investment, its net present value, its projected cash flow and its payback period. If the project's net present value is positive then the project should be accepted. If the project's net present value is in negative then the project should be rejected.

The internal rate of the return is another way for the required rate of the return of the firm (Atkinson, 1999). The annual rate of the return on the project is far better than what the company might be able to earn on any project it may undertake. On the other hand the payback period is almost half of the project time that can reduces the cash flow uncertaininty.

A part from the financial benefits for taking the project,for a making a good decision for the company as the company has the good control over the inventory and it can suspend the production for the lean period however if the company is dependent on the outside the third party the third party can install the production process of the firm by stopping the supply. In case of the third party there is need to enter on the regular supply and this would might result in the build of the inventory over the firm. In short both financial and non financial perspective must be ...