A project should be accepted if its internal rate of return exceeds: O the rate of return on a government bond. O the rate the company pays on borrowed funds. O zero. O the company's required rate of return.
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- The MARR value used for a public project is often based on the interest rate paid on bonds that are issued to raise funds for implementation of the project. O True O FalseIn capital budgeting, a project is accepted only if the internal rate of return equals or: a. exceeds the net present value b. is less than the required rate of return c. exceeds the required rate of return d. exceeds the accrual accounting rate of returnPlease provide as much detail as possible. It must be a detailed explanation for each. What are some of the tax-factor benefits of capital budgeting? a) annual depreciation... how and why is it a benefit? b) interest on loans...why? c) investment tax credits...why?
- 1- What are the payback and discounted payback methods? What are their main weaknesses? 2- What are the five stages of capital budgeting? 3- What are strengths and weaknesses of the accrual accounting rate-of-return (AARR) method for evaluating long-term projects? 4- What are the relevant cash inflows and outflows for capital budgeting decisions? 5- What strategic considerations arise in the capital budgeting process?With everything else held constant, which of the following events should increase the internal rate of return of a capital budgeting project? A. An increase in the cost of the asset. B. A decrease in the firm’s cost of capital. C. A decrease in the cost of operating the asset. D. A decrease in tax benefits.If the interest rate rises, the a. quantity of loanable funds demanded by firms decreases b. quantity of loanable funds demanded by government increases c. quantity of loanable funds demanded by government decreases d. quantity of loanable funds demanded by firms increases
- the federal fund is more effective than The banker’s acceptance in improving the economic growth. Assess the extent to which you agree with the statement with clarifying which one of these financial instruments you prefer to invest and why.Capital budgeting projects are classified as either independent projects or mutually exclusive projects. [Consider NPV, IRR, Payback Period, and Profitability Index] What is a independent project? What is a mutually exclusive project? Why (or under what circumstance) should either be accepted?The internal rate of return is the: discount rate that makes present value of cash inflows equal to present value of cash outflows. discount rate that causes a project's after-tax income to equal zero. discount rate that results in a zero net accounting return. rate of return required by the project's investors.
- Which of the following statements describes the cost of capital? A) The internal rate of return on investments B) The maximum acceptable rate of return on investments C) The minimum rate of return on investments D) The interest rate the bank charges its best customersExplain if there are option differences between government and private firms in terms of sourcing funds from the capital markets?Which of the following is a problem with using payback period for capital budgeting decisions bias against long term projects in favor of short term projects bias against short term projects in favor of long term projects time value of money conceptual violation