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Memorandum: Project Selection Decisions

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The meeting with the analyst went well. However, you want to crunch the numbers yourself to ensure accuracy. Furthermore, you need to consider the project in the broader context of how the new production facility can help the company increase output and, more importantly, profits. You know that the CFO will ask you to analyze the project at different hurdle rates, determine the implication on earnings and cash flow, and articulate why this project was chosen over the multitude of options that exists.

Articulate how companies make project selection decisions.

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The response addresses the queries posted in 718 words with references.

// Memorandum is a communication device that helps in recording events. It is widely used for offices or business purpose. Through this memorandum, how the companies make project selection decisions, is to be focused upon. While writing a memo, a format given below is to be followed.//

Memorandum

Date: October 31, 2007

To: CFO (Chief Financial Officer)

From: ABC Company

Subject: Project Selection decisions

// Memo always starts with a short introduction of about the issue being tackled. Here, the description of the problem is given.//

The companies usually make project selection decisions with the use of techniques of capital budgeting. Most important and useful among them are the Net Present Value (NPV) and the Internal Rate of Return (IRR). They use the NPV and the IRR to evaluate their decisions. The project should be analyzed at different hurdle rates. (Pandey, 2005)

// The second part of the memo is the body of the memo. Here, the issue in detail will be discussed ...

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