Explain the concepts of net present value and internal rate of return analysis. What do the results of net present value and internal rate of return analysis tell senior managers of an organization? Would sensitivity analysis be a useful tool for assessing this capital project's risk and return?
Net present value (NPV) is a way of comparing the initial outlay with the estimated future benefits over the life of the project that are discounted back to the present using time value of money techniques. Internal rate of return (IRR) is a way to estimate the annualized rate of return (in percent) that the returns ...
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