Which of the adhering to is a key disadvantage that the IRR method?(a) through conventional cash flows, the IRR an approach can yield multiple answers.(b) through mutually exclusive projects, the IRR technique can cause incorrect invest decisions.(c) The IRR method is not based on a discounted cash flow technique.(d) The IRR method ignores all cash flows after the arbitrarily cutoff period.
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T or F: In a world that is no ideal, resources rationing occurs, because of this a manager may have the ability to use the profitability table of contents to location projects and choose the ones with the biggest PI"s until the accessible money is exhausted.
Capital budgeting is the process of:(a) keeping track of all the revenues and expenses incurred by a firm during the year.(b) determining exactly how much debt a certain should budget plan for in its resources structure.(c) determining how much funding a firm need to raise.(d) identify which capital investments a firm must make.
Which among the following is an advantage of the NPV method of evaluating capital projects?(a) it is easy to understand also without an audit or finance background.(b) that is consistent with the score of achieving higher net income.(c) It provides a discounted cash flow an approach to readjust for the time value the money.(d) It offers cash flows from financial statements and hence the is more reliable.
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Which that the following funding budgeting an approach ignores the time value of money?(a) Discounted payback period(b) Net existing value(c) Modified internal rate of return(d) Payback period
If a firm deserve to undertake just some the the value-adding projects accessible to it due to the fact that of limited funds, the certain must communicate in:(a) funding asset pricing.(b) capital expansion.(c) resources expenditures.(d) funding rationing.
For independent, conventional projects, if a project"s IRR over its _____, the project need to be _____.(a) MIRR; rejected(b) NPV; accepted(c) expense of capital; accepted(d) expense of capital; rejected
The NPV and IRR approaches will always agree as soon as you are assessing _____ projects and also the project"s cash flows are _____.(a)mutually exclusive; conventional(b) mutually exclusive; unconventional(c) independent; unconventional(d) independent; conventional
the most crucial investment decisions made by management(determine the long-term productive assets that will produce wealth for a firm"s owners)
large cash outlays, permanent commitments, not easily reversed, and also primary components in a firm"s long-run performance
help administration systematically analysis potential methods in stimulate to decide which room worth undertaking
- most is generated internally, often start with the sales force- every the info is reviewed by financial managers who evaluate the feasibility the the project
projects for which the decision to expropriate or reject is not influenced by decisions around other tasks being considered by the firm
projects for which the decision to accept one job is concurrently a decision come reject one more project
Requires the same steps as valuing gaue won assets:(1) calculation future cash flows(2) estimate price of capital/required rate-of-return(3) calculate present value of future cash flows
-Cash flow approximates must be prepared in-house and are no as readily easily accessible as those for financial assets with legal contracts-Estimating required-rates-of-return for actual assets is more an overwhelming than estimating forced return for financial assets since no market data is available
positive - boost shareholder wealthnegative - to decrease shareholder wealth(zero NPV - indifferent)
(1) Estimate task cost- The cash flow in year zero (NCF0) on the timeline is negative, indicating an outflow(2) Estimate task net cash operation - encompass the salvage worth of the project in the terminal year(3) determine project risk and estimate price of capital- The cost of resources is the discount rate used to determine the present value of expected net cash flows- The riskier a project, the higher its expense of capital(4) Compute the project"s NPV - identify the difference between the present values of the expected net cash flows from the project and also the expected price of the project
(1) supplies the discounted cash flow valuation method to change for the moment value that money(2) provides a straight (dollar measure) of just how much a resources project will rise the value of the firm(3) Is constant with the goal of maximizing stockholder value