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3. If the discounted payback period of a project is lower than the lifetime, NPV helps us to find out the effect of the remaining cash flows after payback period on the profitability of the project. However, some of the disadvantages that the NPV can show are the following (Erturk 2011): 1. It does not measure the risk of cash flows. 2. Positive NPV only shows that the rate of return of the relevant project is higher than the discount rate, which can be considered as not a sufficient criterion to measure the profitability of a project in terms of the rate of return of the project The Internal Rate of Return (IRR), according to Zhang (2009), Ercan (2011), and Brealey and Myers (2003), is defined as: “the interest rate that can make NPV equal to zero.” Arati (2009) defined the IRR as: “the annualized rate of return that is possible to earn on the newly invested capital.” When the NPV is positive, the IRR will be greater than the discount rate; while when the NPV is negative, the IRR will be less than the discount rate (Lang and Merino 1993). This relationship helps to determine if a project is economically feasible, so when the IRR is bigger than the interest rate, the project is considered as feasible (Zhang 2009). 2.9 LEAN MANUFACTURING The industrial environment is changing; manufacturing organizations are under pressure to improve productivity and quality while reducing costs (Gulshan 2012). Lean manufacturing proposes a simple, feasible, reliable, cost effective, revolutionary, synergistic, and complete philosophy that can be implemented in wood industries to reduce and eliminate waste. In lean manufacturing, waste can be defined as anything that adds unnecessary costs to the product without adding value, where value is defined as the product that a costumer is willing to pay. Therefore, this philosophy helps improve the product flow through process, shortens the manufacturing lead times, reduces defects, and supports continuous improvement (Lean Enterprise Institute 2007). 21PDF Image | Impact of Vacuum-Drying on Efficiency of Hardwood Products
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