Prompt: Provide your recommendation on a potential investment project for Home Depot Inc. based on the net present value (NPV) and internal rate of return (IRR). Compare these calculations for their use in evaluating a potential investment. Complete your calculations on the designated tab (Capital Budgeting Data) in the Final Project Student Workbook.
Specifically, the following critical elements must be addressed:
IV. Capital Budgeting Data
A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items:
1. The net present value (NPV) of the project
2. The internal rate of return (IRR) of the project
B. What are the implications of these calculations? In other words, based on each of the calculations, and being mindful of the need to balance portfolio risk with return, would you recommend that the company pursue the investment? Why or why not? Be sure to substantiate your claims.
C. What is the difference between NPV and IRR? Which one would you choose for evaluating a potential investment and why? Be sure to support your reasoning with evidence.
*Case study link for Home Depot – https://www.sec.gov/Archives/edgar/data/354950/000035495015000008/hd-212015x10xk.htm