Applied management accounting Essay Example | Topics and Well Written Essays - 1000 words

Applied management accounting - endeavor ExampleFurthermore, since its NPV of $20,149.83 is greater than the NPV of Machine 2 therefore we leave give it a higher antecedence because of higher NPV.This equipment has a payback diaphragm of 3 years and 11 months therefore it lags behinds in terms of bumping the initial capital expenditure than Machine 2 or Machine 3. However, the payback period is not the ultimate criterion in accepting and rejecting projects therefore we will first look at this projects NPV.This project has the highest NPV of $169,311.58 therefore we will invest in this Machine as it has the precedent to add greatest shelter to the company. However, this is the most risky project as the larger cash flows will be generated during the long-term which are most of the time difficult to exactly predict due to uncertainty.The authorize Present Value Method takes into account the time value of the money plus it also determines how overmuch of the wealth will be adde d to the companys net worth. Or we can say that it gives us an idea of the profitability of the projectThe payback period calculates how much time it would take the project to recover the capital expenditure invested in the project. It is useful when the time horizon is short as it becomes vital to go to bed how quickly the investment will be recovered.The payback period does not incorporate the time value of money. Another inherent flaw in this method is that it does not take into account the future cash flows which will be available after the initial expenditure has been