ACCCB/543 Competency 1 Assessment and Rubric

Course Title: Managerial Accounting and Legal Aspects of Business

Competency Assessment Title: Net Present and Internal Rate of Return

Assignment Directions
Review the scenario and complete the activity below. This scenario can also be found in the “Problems – Series A” section 10-19A of Ch. 10,
“Planning for Capital Investments” of Fundamental Managerial Accounting Concepts.

Dwight Donovan, the president of Donovan Enterprises, is considering 2 investment opportunities. Because of limited resources, he will be able to
invest in only one of them.

Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage
value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for
Project A are $400,000 and for Project B are $160,000. The annual expected cash inflows are $126,000 for Project A and $52,800 for Project B.

Both investments are expected to provide cash flow benefits for the next four years. Donovan Enterprises’ desired rate of return is 8 percent. Your
task, as Senior Accountant, is to use your knowledge of net present value and internal rate of return to identify the preferred method and best
investment opportunity for the company and present your results to Dwight Donovan.

Use Excel®—showing all work and formulas—to compute the following:

• The net present value of each project. Round your computations to 2 decimal points.
• The approximate internal rate of return for each project. Round your rates to 6 decimal points.

Create an 8- to 10-slide presentation showing the comparison of the net present value approach with the internal rate of return approach that you
calculated.

Complete the following in your presentation:

• Analyze the results of the net present value calculations and the significance of these results, supported with examples.
• Determine which project should be adopted based on the net present value approach and provide rationale for your decision.
• Analyze the results of the internal rate of return calculation and the significance of these results, supported with examples.
• Determine which project should be adopted based on the internal rate of return approach and provide rationale for your decision.
• Determine the preferred method in the given circumstances and provide reasoning and details to support the method selected.
• Synthesize results of analyses and computations to determine the best investment opportunity to recommend to the president of Donovan
• Enterprises and provide rationale for your recommendation.
• Include detailed speaker notes.

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 ACCCB/543 Competency 1 Rubric
Page 2 of 3

Competency Assessment Rubric

Assignment/Performance Mastery Meets Expectations Not Met
Criteria 100% 85% 0%
1. Computations Showed formulas, formulas were Showed formulas, formulas were Showed formulas, formulas were not
(weight 30%) completely correct, showed all partially correct, showed some correct, showed some calculation details
calculation details, and calculation details and and calculations are not correct resulting in
calculations were completely calculations are partially correct inaccurate interpretations or did not show
correct, resulting in completely resulting in inaccurate formulas or did not show calculation
accurate interpretations. interpretations. details.

2. Net Present Analysis Thoroughly analyzed results of Partially analyzed results of the Narrowly analyzed results of the net
(weight 8%) the net present value calculation; net present value calculation; present value calculation; narrowly showed
showed the significance of partially showed the significance significance of results; examples minimally
results from a creative and of results; examples mostly supported analysis or did not analyze the
innovative perspective; examples supported analysis. results of the net present value calculation;
thoroughly supported the did not analyze significance of results; did
analysis. not include examples to support analysis.

3. Net Present Value Determined which project should Determined which project should Determined which project should be
Approach Decision be adopted based on the new be adopted based on the new adopted based on the new present value
(weight 8%) present value approach and present value approach and approach and provided a narrow rationale
provided a thorough, creative, provided a partial rationale to to support decision or did not determine
and innovative rationale to support decision. which project should be adopted based on
support decision. the new present value approach or did not
provide a rationale to support decision.

4. Internal Rate of Return Thoroughly analyzed the results Partially analyzed the results of Narrowly analyzed results of the internal
Analysis of the internal rate of return the internal rate of return rate of return calculation; narrowly showed
(weight 8%) calculation; showed the calculation; partially showed the the significance of results; examples
significance of results from a significance of results; examples partially supported analysis or did not
creative and innovative mostly supported analysis. analyze results of the internal rate of return
perspective; examples calculation; did not analyze significance of
thoroughly supported analysis. results; did not provide examples to
support analysis.

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 ACCCB/543 Competency 1 Rubric
Page 3 of 3

Assignment/Performance Mastery Meets Expectations Not Met

Criteria 100% 85% 0%
5. Internal Rate of Return Determined which project should Determined which project should Determined which project should be
Approach Decision be adopted based on the internal be adopted based on the internal adopted based on the internal rate of
(weight 8%) rate of return approach and rate of return approach and return approach and provided a narrow
provided a thorough, creative, provided a partial rationale to rationale to support decision or did not
and innovative rationale to support decision. determine which project should be adopted
support decision. based on the internal rate of return
approach or did not provide a rationale to
support decision.

6. Preferred Method Determined the preferred method Determined the preferred method Determined preferred method for given
Decision for the given circumstances and for the given circumstances and circumstances and provided narrow
(weight 18%) provided thorough, creative, and provided partial reasons and reasons and details to support decision or
innovative reasons and details to details to support decision. did not determine preferred method for
support decision. given circumstances or did not provide
reason and details to support decision.

7. Best Investment Thoroughly synthesized the Partially synthesized the results Narrowly synthesized the results of
Opportunity results of analyses and of analyses and computations to analyses and computations to determine
Recommendation computations from a creative and determine the best investment the best investment opportunity to
(weight 20%) innovative perspective to opportunity to recommend to the recommend to the president of Donovan
determine the best investment president of Donovan Enterprises or did not synthesize the
opportunity to recommend to the Enterprises. results of analyses and computations to
president of Donovan determine the best investment opportunity
Enterprises. to recommend to the president of Donovan
Enterprises.

Copyright 2021 by University of Phoenix. All rights reserved.