Excel gives IRR value of 19.23% as shown below.
Note: The IRR is often tied to the payback period. The payback period is the amount of time it takes to recover the cost of an investment. Simply put, it is the length of time an investment reaches a break-even point. However, the main issue is that the time value of money is not factored into the calculation of the payback period.
Decision
If the project’s IRR significantly exceeds the WACC, the project is creating value. Mathematically, if NPV > 0 and IRR > WACC, the firm should proceed with the project as it will likely generate sufficient brazil rcs data returns to justify the investment. If not, the company may need to rethink the investment or consider alternative projects that provide a better IRR. In this case, the NPV value is $65,688.23 and is greater than zero and the IRR value of 19.26% is greater than the WACC value of 10%. This case study demonstrates how the logistics firm used NPV, IRR, and WACC to assess the value of a D&A project, providing a structured financial approach to making informed investment decisions.
Overall, data-driven companies demonstrate improved business performance. McKinsey says that D&A can provide EBITDA (earnings before interest, taxes, depreciation, and amortization) increases of up to 25%. According to MIT, digitally mature firms are 26% more profitable than their peers. Forrester research found that organizations using D&A are three times more likely to achieve double-digit growth. In our experience, D&A projects have yielded a 3%-9% increase in net income and up to 15%-30% IRR.