Question

After reading the article on Shareholders versus Stakeholders approach, think about the Jiminy Peak case study. Answer the following questions, being sure to use complete sentences, good grammar, and professionalism in your response. How do the Payback period, the NPV, and the IRR for this project help management make a decision?

Answer 1

The Payback period, NPV, and IRR are financial metrics that assist management in decision-making by illustrating the time risk, expected profitability, and comparative rate of return of a project, respectively.

Step-by-step explanation:

The financial metrics of Payback period, Net Present Value (NPV), and Internal Rate of Return (IRR) are crucial for management when deciding on the viability of a project like the one in the Jiminy Peak case study.

The Payback period helps management understand how long it will take for the project to repay its initial investment, providing a straightforward view of the time risk involved. NPV is a measure of the project's profitability, showing the difference between the present value of cash inflows and outflows; a positive NPV indicates the project is expected to generate value over its cost.

Lastly, IRR provides the expected rate of return of the project, helping managers to compare it against other potential investments or the company's required rate of return. Collectively, these measures help management make informed decisions balancing risk, profitability, and strategic goals.