Respond to the scenario below with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. Eddison Electronic Company (EEC) provides electricity for several states in the United States. You have been employed as a cost accountant at this organization. The Operations department is thinking about making a capital investment this current year. Prepare a memo to the VP of Accounting at EEC that answers the questions below based on the following criteria: Capital Budgeting

Making key capital budgeting decisions is critical for businesses to maintain a competitive advantage. Capital budgeting involves making long-term investment decisions and analyzing opportunities to generate returns over a period of more than a year (Mafazi, 2018). The basic amortization approach, the internal rate of return (IRR) and net present value (NPV) approach are the three main capital planning approaches (Siziba & Hall, 2021). This memorandum seeks to assess the implementation of the capital budgeting methodology in determining capital investments for Edison Electronics Corporation (EEC).

The present value method compares the present value of financial benefits such as increased revenue and cost savings to the present value of the investment under consideration. One benefit of NPV is that today’s bills are more valuable than tomorrow’s bills because individuals can invest today and earn interest tomorrow (Wang, 2021). Second, shareholders can quickly determine how much value they can get from a project or investment because NPV is expressed numerically (Szűcsné, 2016). Senthilnathan (2020) outlines the disadvantage of the NPV method that there is no objective or accurate way to estimate the discount rate; therefore, incorrect determination of the discount rate can lead to wrong conclusions…

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