Running head: FINANCIAL ANALYSIS1Financial AnalysisName:Institutional affiliation2FINANCIAL ANALYSISFinancial AnalysisThe Net Present ValueNet Present Value (NPV) concept of capital budgeting is the most used by business in theevaluation of decision-making on whether to invest or not in a new capital project. The projectsare always long-term and involve large amounts of money. The NPV uses the discounted cashflows to analyze the value of the projects hence making it the most appropriate capital budgetingmethod since it considers both the time value of money and the risk factors (ilavsk, 2014). Itimplies that the NPV evaluates the forecasted cash flows of the project by discounting them tothe current time using the lifespan of the project and the WACC of the firm. The firm shouldinvest in the project if it yields positive results whereas the business should not invest in theproject if the results are adverse outcomes. However, it is necessary to determine whether theplans are mutually exclusive or independent before using the NPV.Mutual exclusive projects differ from the independent projects in different ways.According to the NPV decision rules, if the NPV of the joint project is more than for the otherproject, then a firm should choose the project with the highest NPV. If the NPV of both projectshas negative Net Present Values, then the organization should reject all the plans. In themetropolitan for-profit hospital case, the health institut ...
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