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Initial Response should be between 50-150 words.R1IRR stands for internal rate of return. When used, it estimates the profitability of potential investments using a percentage value rather than a dollar amount. It is also referred to as the discounted flow rate of return or the economic rate of return. It excludes outside factors such as capital costs and inflation. Unlike the IRR, a company’s NPV, or net present value, is expressed in a dollar figure. It is the difference between a company’s present value of cash inflows and its present value of cash outflows over a specific period of time.Both IRR and NPV can be used to determine how desirable a project will be and whether it will add value to the company. While one uses a percentage, the other is expressed as a dollar figure. While some prefer using IRR as a measure of capital budgeting, it does come with problems because it doesn’t take into account changing factors such as different discount rates. In these cases, using the net present value would be more beneficial.Palmer, B. (2020, September 16). Capital Budgeting: IRR or NPV? Retrieved November 16, 2020, from https://www.investopedia.com/ask/answers/05/irrvsn…R2The Net Present Value (NPV) method calculates the dollar value of future cash flows which the project will produce during the particular period of time by taking into account different factors whereas the internal rate of return (IRR) refers to the percentage rate of return which is expected to be created by the project. Without modification, IRR does not account for changing discount rates, so it’s just not adequate for longer-term projects with discount rates that are expected to vary. R3The NPV and IRR are two discounted cash flow methods, and it is used for evaluating investments or capital projects. NPV is the dollar amount difference between the discounted cash inflows’ present value and fewer outflows over a specific period. IRR estimates the profitability of potential investments using a percentage value rather than the dollar amount. So, both IRR and NPV may be used to determine how desirable a project is and whether it will add value to the business. While one uses a percentage, the other is expressed as a dollar figure. This does not consider the changing factors of IRR, for example, the different discount rates. In these cases, using the net present value can be more helpful (Gallant, 2020). So, I would agree that it depends on what a person is doing and what information he/she has to choose the correct one to determine the results they want.IRR method simplifies projects to a single number that management may use to determine whether a project is economically viable. A business can go ahead with a project if the IRR is calculated to be more than the company’s required rate of return or show a net gain over time. On the other hand, the business may reject a project if it fails below that rate or return, or it is a project a loss over time. Also, the NPV estimates the business future cash flows of that project. It then discounts them into present value amounts by using a discounted rate representing the project’s capital cost and the risk. These future positive cash flows are then reduced into a single present value figure, and this number is deducted from the initial amount of cash that is needed for those investments (Palmer, 2020).The NPV method is very complicated and requires assumptions at each stage; for example, the discount rate or the likelihood of receiving the cash payment. Knowing this information, I would suggest determining which one will be more helpful and use that one compare to the other one. There are many disadvantages and advantages to consider in deciding which one to use or not to use. I am not saying one is better than the other, but understanding these concepts will help decide which one to choose.ReferencesGallant, C. (2020, September 24). Present Value vs. Internal Rate of Return. Investopedia. https://www.investopedia.com/ask/answers/05/npv-irr.asp.Palmer, B. (2020, September 16). Capital Budgeting: IRR or NPV?Investopedia. https://www.investopedia.com/ask/answers/05/irrvsnpvcapitalbudgeting.asp.R4Incremental cash flow is the additional

operating cash flow that an organization receives from taking on a new project. A positive incremental cash flow means that the company’s cash flow will increase with the acceptance of the project. A positive incremental cash flow is a good indication that an organization should invest in a project. Incremental cash flow is important in capital budgeting because it helps predict cash flow in the future and determine a project’s profitability. Incremental cash flows are helpful, especially in determining if a company should take on a new project or not.Incremental Cash Flow – Definition, Difficulties in Computing. (2019, September 05). Retrieved November 16, 2020, from https://corporatefinanceinstitute.com/resources/kn…Tuovila, A. (2020, September 20). Incremental Cash Flow. Retrieved November 16, 2020, from https://www.investopedia.com/terms/i/incrementalca…R5Incremental cash flow is the additional operating cash flow that an organization receives from taking on a new project. A positive incremental cash flow means that the company’s cash flow will increase with the acceptance of the project. A positive incremental cash flow is a good indication that an organization should invest in a project. Capital budgeting is the evaluation and selection of long-term investments on the basis of their costs and potential returns. Cash flow estimates are used to determine the economic viability of long-term investments. The cash flows of a project are estimated using discounted and nondiscounted cash flow methods.R6Incremental Cash Flow and Capital BudgetingWhen determining incremental cash flows from a new project, several problems arise sunk costs, opportunity costs, externalities, and cannibalization (Brigham & Daves, 2019, p. 1159, 1144).Sunk Costs-These is the initial outlays required to analyze a project that cannot be recovered even if it is accepted. As such, these costs will not affect the project’s future cash flows and should not be considered when making capital budgeting decisions (Brigham & Daves, 2019, p. 1180).Opportunity Cost-This is the cost of not going forward with a project or the cash outflows that will not be earned due to utilizing an asset for another alternative. For example, the opportunity cost of Newco’s new addition considered above is the cost of the land on which the company is considering putting the new plant addition. As such, it should be included in the analysis of the project (Tuovila, 2020).Externality-In consideration of incremental cash flows of a new project, there may be effects on the company’s existing operations to consider, known as “externalities.” For example, the addition to Newco’s plant is to produce a new product. It must be considered whether the new product can take away or add to the existing product’s sales (Tuovila, 2020).Cannibalization-Cannibalization is the type of externality where the new project takes sales away from the existing product (Brigham & Daves, 2019, p. 1143).Changes in Net Working Capital-A change in networking capital are essentially the current assets minus changes in current liabilities. A project typically adds to current assets given additional inventories or potential increases in accounts receivables from new sales within the capital-budgeting process. However, the increases to current assets are offset by current liabilities needed to finance the new project. Overall, there may be a change in networking capital from the new project. If the change in net working capital is positive, the change to current assets outweighs the current liabilities’ change. However, the change in networking capital is negative; the change to current liabilities outweighs the current assets’ change (Cole, 2017).ReferencesBrigham, E. F., & Daves, P. R. (2019). Intermediate financial management. Cengage.Cole-Ingait, P. (2017, November 21). Capital Budgeting: Estimating Cash Flow & Analyzing Risk. Small Business – Chron.com. https://smallbusiness.chron.com/capital-budgeting-estimating-cash-flow-analyzing-risk-71904.html.Tuovila, A. (2020, September 20). Incremental Cash Flow. Investopedia. https://www.investopedia.com/terms/i/incrementalcashflow.asp.