What is meant by capital planning? Why is IRR important to an organization? Why is NPV important to a project? How would you select from multiple projects presented to your organization?
1. What is meant by capital planning?
Capital planning is the process of developing a written strategy detailing steps to be taken to increase capital to at least minimum requirements. It is a systematic approach to managing the risks and returns of investments for a given mission. Capital planning involves the creation of plans for the acquisition of long-term assets. For an asset to be profitable, it has to return more than what the company is paying for it over the long term.
2. Why is IRR important to an organization?
As per Investorwords.com:
Internal Rate of Return (IRR) is the rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity. Also called ...
The solution defines capital planning for a healthcare organization, the importance of IRR and NPV and how one would select from multiple projects presented to a healthcare organization. References are included.