The profitability index O will never be greater than 1. O does not take into account the discounted cash flows. O allows comparison of the relative desirability of projects that require differing initial investments. O is calculated by dividing total cash flows by the initial investment.
Q: Breakeven cash inflow refers to ________. the minimum level of cash inflow necessary for a…
A: Net present value is one of the discounted techniques of capital budgeting which is used to measure…
Q: If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues…
A: A project consists of fixed as well as variable costs. Fixed costs remain fixed all the time,…
Q: If the sum of the incremental cash flows is negative, what is known about the rate of return on the…
A: Incremental Analysis: The method to measure the viability of different options related to business…
Q: What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV:…
A: Introduction: This question is related to the concept of capital budgeting. It is nothing but an…
Q: The time value of money concept is given consideration in long-range investment decisions by Group…
A: The time value of money concept is given consideration in long-range investment decisions by :
Q: If a project with conventional cash flows has an IRR equal to the required return, then: O The…
A: IRR is the actual rate of return earned on the project while the required return is the discount…
Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…
A: WACC is the required rate of return, where as IRR is the actual rate of return of the project. NPV…
Q: f a project's cash flows are discounted at the internal rate of return, the NPV will always be…
A: Internal rate of return is the rate at which present value of cash inflows is equal to present value…
Q: Which of the following statements is correct regarding the payback method? Takes account of…
A: Payback period is a tool of capital budgeting used to evaluate projects and investments.
Q: If an investment project will positively affect the cash flows of other products the firm currently…
A: Cannibalization can be defined as the negative effect on the existing business line or the product…
Q: You have determined the profitability of a planned project by finding the present value of all the…
A: We determine the profitability of project by discounting the future cash flows with appropriate…
Q: True or False A project will have multiple internal rates of return if its future net cash flows…
A: Internal rate of return (IRR) is the annual rate of return which is anticipated from the cash flows.…
Q: This calculation determines profitability or growth potential of an investment, expressed as a…
A: Given: The expression of the growth potential of investment is given and to find out the point at…
Q: Differences between the ERR and the IRR include the following: a. The ERR will yield a unique…
A: From the various given statements, we have to find the difference between the internal rate of…
Q: An investment is guaranteed to have a unique value of IRR if which of the following is true? a.…
A: Given: The unique IRR value in the investment.
Q: The net present value: is equal to the initial investment when the internal rate of return is equal…
A: The net present value is determined by, The Net present value (NPV) is defined as the difference…
Q: Question 1 Which one of the following statements is NOT correct? Group of answer choices If…
A: Capital budgeting is a technique to estimate the profitability of the projects. There are various…
Q: Which of the following statements is False regarding the payback period method: DA Use as a tool in…
A: Statement -D is false.As payback period method is Non- discounting cash flow criteria…
Q: Select the Incorrect statement concerning the present value index (PVI). Multiple Choice The PVI is…
A: Present value index or profitability index :- It is ratio of total present value of cash inflows to…
Q: Which one of the following statements is correct concerning the payback rule? a. The payback…
A: Answer - Payback Period - The payback period is the amount of time it will take to recover the…
Q: Which of the following statements is correct? - NPV method is the only method firms should use to…
A: Mutually exclusive projects Mutually exclusive projects are projects that are in direct competition…
Q: When the present value of the cash inflows exceeds the initial cost of a project, then the project…
A: If present value of cash inflows exceeds the initial cost of a project, then NPV of the project will…
Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…
A: It refers to the rate of return that is computed by the company to make a decision of selection of a…
Q: The internal rate of return method of evaluating capital investments can be used with uneven cash…
A: Uneven cash flows is a series where the cash flows are not the same throughout the project's life.…
Q: The AW of a project can be estimated by reducing all cash flows including the capital investment,…
A: Annual worth is the equivalent annual value for the cash flows for the given investment project.
Q: Mathematically, we can determine the rate of return for a given project’s cash flow series by…
A: When Cash Flows are discounted by using Internal Rate of Return for a period of cash flows held.…
Q: Which of the following statements is true? Multiple Choice When NPV is 0, the IRR is equal to…
A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…
Q: Which of the following statements is CORRECT?
A: Net Present Value (NPV) Net Present Value method is a discounting cash flow technique used in…
Q: Which of the following statements Is false with respect to the simple rate of return? Multiple…
A: Formula: Simple rate of return = Average profits / Initial investment
Q: An advantage of the net present value method over the internal rate of return model in discounted…
A: The internal rate of return model considers the constant discounting rate for discounting the cash…
Q: When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O…
A: Free cash flow refers to funds of the company which is freely available to be repaid to the…
Q: te
A: Introduction : The given question relates to the capital budgeting techniques which are used to…
Q: If a capital project has a hurdle rate higher than its internal rate, then its profitability index…
A: Solution Explanation- A hurdle rate is the minimum rate of return required on a project or…
Q: If a low cash flow this year makes a low cash flow next year more likely to occur, this means the…
A: The question is related to the Cash flows pattern. Corrected means in which one thing affects or…
Q: The ____ of an investment is the period of time for the ____ to equal the initial cash outlay. a.…
A: The payback period refers to the amount of time it takes to recover the cost of an investment.…
Q: A project's internal rate of return (IRR) is the that forces the PV of its inflows to equal its…
A: Since you have asked a question with multiple parts, we will only solve the first 3 parts for you.…
Q: Which of the following statements is true about the internal rate of return? a. It is the…
A: The internal rate of return is a financial measure used to measure the attractiveness of a…
Q: Future worth and annual cash flow analysis often require far less computation than rate of return…
A: Rate of return : Computation of Rate of return involves adopting trial and error method. It involves…
Q: ssume a project has normal cash flows. All else equal, whic llowing statements is correct? A…
A: The pay back period is the amount of time required to recover the initial amount of investment and…
Q: Which of the following statements is most correct? If a project’s internal rate of return (IRR)…
A: SOLUTION- EXPLANATION- IF IRR OF ANY INVESTMENT PROPOSAL IS MORE THAN ITS COST TO FINANCE CAPITAL…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- To find NPV, it requires Choices: A.none of the choices B.discount rate and estimated cash flows C.investment amount plus discount rate D.discount rate and inflation rate E.estimated cash flow and capital structureWhen using the NPV method for a particular investment decision, if the present value of all cash Inflows Is greater than the present value of all cash outflows, then _______ . A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowDifferences between the ERR and the IRR include the following: a. The ERR will yield a unique solution (no multiple rates of return as in the IRR) b. In the ERR, funds recovered from the investment are assumed to earn returns equal to the MARR c. The ERR is always a value somewhere between the IRR and the MARR d. All of the above.
- which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of moneyThe present value of cash flows in Investment A is lower than the present value of cash flows in Investment B. O C. The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B. O D. No comparison can be made-we need to know the cash flows to calculate the present value.Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.
- All of the followings are True when the net present value method is used to choose between two investment alternatives, except: OA All cash inflows and outflows should be considered in calculating the net present value of the two alternatives. OB. Oc The net present value of the two alternatives calculated using the total cost approach need to be compared. Managers should choose the alternative that has the least total cost from a present value perspective. The relevant cash flows should be isolated from the irrelevant cash flows. OD.All of the following statements regarding NPV are true EXCEPT:a. A positive NPV indicates the present value of the cash flows exceeds the initial investment.b. A negative NPV indicates the present value of the cash flows is less than the initial investment.c. An NPV equal to zero indicates the present value of the cash flows is equal to the initial investment.d. The internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows.Discuss Positive side effects and negative side effects cash flows? Provide examples. Explain thestand-alone principle. Provide examples.
- Which of the following statements is CORRECT? O Projects with "normal" cash flows can have two or more real IRRS. O Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal." O The "multiple IRR problem" can arise if a project's cash flows are "normal." O Projects with "nonnormal" cash flows are almost never encountered in the real world. O Projects with "normal" cash flows can have only one real IRR.A. Using AW, determine whether this proposal is acceptable. B. What is the ERR of this proposal? Is it acceptable? C. What is the IRR of this proposal? Is it acceptable? Show the cash flow diagram if necessary and complete solution. Do not use excel please. Thank you.When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________. Group of answer choices A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too low