# Strategic Corporate Finance Analysis Essay

Pay back method

The method entails evaluating projects in terms of the number of years that it would take for the invested capital to be paid back. In that respect, the suitable project among the list is the one with the shortest payback period. According to the method, a shorter payback period is an indication of a higher return on

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IRR Method

Internal rate of return evaluation method (IRR) provides a discount rate with which a projects’ net present value equals zero hence equating the projects value with the initial cash outlay. In that respect, a project is suitable if its IRR is greater than the targeted rate of return hence the higher the IRR value the more suitable a project is. Therefore, the method evaluates both projects as suitable for having IRR rates of 26.6% and 24.7% for small and large projects respectively which are higher than the 12% benchmark. However, the small wind-farm project is favorable for having a higher IRR than the large project. (Zaharuddin, 2008)

ARR Method

The ARR evaluation method is usually applied in a project’s evaluation as a means of estimating its rate of return that should be achieved. In that respect, the method uses benchmark return rates which if