3. Internal Rate of Return
The internal rate of return is used by economists and investors to identify the expected financial outcome of a given project. It is generally accepted that the final value of the internal return will vary from the initial calculations, but it is still relevant as the proportions in modifications will tend to remain relatively constant. The internal rate of return can be perceived similarly to the growth rate a project is expected to return and given this situation, the project with the highest IRR will be the one to be selected by the organization (Investopedia, 2009).
Internal rates of return for the four alternative investment projects are: project A -- 21%, project B -- 25%, project C -- 24% and project D -- 23%. Based on this measured rates, the most desirable course of action for Galaxy Satellite Co. is investment project B, with the highest IRR of 25%.
4. The Decision
The manager...
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