The CFO of Advo Corporation is considering two investment opportunities (Edmonds, Tsay & Old, 2011). In order for Advo Corporation to move forward let us take into consideration several systematic approaches to enable them to make good decision making (Edmonds, Tsay & Old, 2011). The firm must compute "the net present value" of each project enabling Advo 's to analyze their options for investment (Edmonds, Tsay & Old, 2011). First, let us consider that Advo 's 16% with a capital investment of $400,000 starting with both projects (Edmonds, Tsay & Old, 2011). For Advo 's to know for certain, that their investment will yield a proper return they begin with four basic steps, first, does the firm invest, secondly, for how long, thirdly, the consideration of what type of interest will best secure the firms futures return from interest or rather the additional pay off for investing capital funds in the first places, and lastly, the amount of money decided on (Edmonds, Tsay & Old, 2011). In other words; Advo 's Corporation has decided to invest, secondly, Advo 's will invest for 4 years, thirdly, they will invest at a 16% annual compounded yielding and finally, they will invest with $400,000 USD (Edmonds, Tsay & Old, 2011).
The net present value of each project is an appraisal technique that
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An analysis shows that the larger investment in the first two years maximizes the delivery of a higher return (Edmonds, Tsay & Old, 2011). Furthermore, in project one, the later years being 3 and 4 are higher in the disbursement of the 3rd year being $160,000 and the 4th year being $178,000 verses project 2 being relatively smaller in comparison (Edmonds, Tsay & Old, 2011). Project 2 in the 3rd year being $114,000 and year 4 is $112,000 (Edmonds, Tsay & Old,