Dilema at Day-Pro Essay

The crossover point is the rate at which the NPV of the 2 projects are equal. NPV has a direct relationship between NPV and Economic esteem Added. The NPV shows how the shareholders wealth would be growthd if the project is accepted. The goal of the social club is to increase shareholders wealth, thus NPV shows the mitigate way in choosing the right finis to pass on their goal. NPV method implicitly assumes that the rate at which cash flows peck be reinvested is the cost of capital, whereas the IRR method assumes that the firm can reinvest at the IRR. NPV method is better beca practice session it selects the project that adds the most to shareholder wealth.Tim can show that the MIRR is the to a greater extent virtual(prenominal) measure to use in the case of mutually exclusive contracts by explaining that by using MIRR, they can avoid the multiple IRR problems and at the aforementioned(prenominal) time explain that since reinvestment at the cost of capital is generally more correct, the MIRR which assumes that CFs from all projects are reinvested at the cost of capital rather than on the projects own IRR (in the case of IRR), is a better index of a projects true profitability. Tim could also state that with the use of MIRR, the company can avoid some conflicts encountered when comparing NPV with IRR. With the use of MIRR, they can minimize the conflict between the twain, just like when the two projects creation compared have equal size and same life, both NPV and MIRR leads to the same decision. The company can also arrive at the same decision when the two projects being compared have equal size and contrary life.Using gainfulness Index can help in deciding which project to exact be deliver it gives the ratio which allows us to measure the proportion of money returned to money invested. gum olibanum by profitability index, it allows us to compare investment opportunities that conveys us different initial investments. The higher profitabili ty index will be elect because it gives higher possible return in the amount that is to be invested. In short, in the dilemma of Day-pro, semisynthetic rosin must be chosen because it gives a higher return in spite of the high initial investment. However, in using this method, the analyst will ignore many factors, such(prenominal) as risk, cost of capital, and liquidity of the project. Thus, the company must consider or decide first on what factor they will base their decision in choosing a project.Being more conservative in revenue enhancement projection will give us an idea that the project is slight liquid because they projected a longer period of time ahead the company can earn back the invested amount. Moreover, it also indicates that they considered the possible risks that whitethorn occur in the project along the way. The chance of overestimation and underreckoning of the project is slight possible that make it more realistic. Thus, the Synthetic Resin project is more reliable and accurate. Knowing that the synthetical resin would require extensive and longer time in the beginning it could be implemented, it will cause doubt on the part of the Board to choose this project because it exactly says that Synthetic Resin project is less liquid compared to epoxy resin and the company will be tied longer to this project before it can regain the invested capital.However, looking at the other side of the coin, synthetic resin gives a higher return in spite of its flaws and its risks. On the other hand, Epoxy Resin seems to be more liquid and less risky and the return of this project is less compared to the Synthetic Resin. As a result, the gameboard might be more attracted to Epoxy Resin. Still, the decision of the board depends on what they give importance or emphasis in choosing a project. And since the Board has a strong preference in using order or return as its criteria, we would recommend to the Board to choose Synthetic Resin.