A project will be preferred when it has:a) Higher payback periodb) Lower Payback periodc) Normal payback periodd) None of the above

Payback period is the time period in which the investment will pay its initial cost back. The…

Answered: A project will be preferred when it…

Business

Finance

A project will be preferred when it has:

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 5DQ

See similar textbooks

Related questions

Q: What does the beta of the project represent and how will higher project betas affect your decision?

A: Beta coefficient shows the systematic risk of the assets. In simple words, the beta coefficient…

Q: Determine the internal rate of return of a project?

A: Capital budgeting analysis is useful to know which projects are profitable and which are not. There…

Q: Which of the following best explains the limitations of usin discount rate for evaluating projects?

A: Note: 'Since you have asked multiple questions, we will solve the first question for you. If you…

Q: Which is the most efficient analysis method used to determine the project acceptability on an…

A: Present worth is a financial identicalness approach in which incomes of a venture are estimated at…

Q: Calculating Net Present Value of a project is an application of which technique: a. SWOT Analysis.…

A: In order to determine the profitability of the projected investment, Net present value is…

Q: To estimate project value, FCF should be computed at

A: Step 1 The income that an organization receives after a cash outflow is called a free cash flow. It…

Q: When faced with a set of independent projects, one should select (choose the best answer) A. all…

A: Solution: 'When faced with a set of independent projects, one should select "all projects with a…

Q: A project's terminal value is the ______.

A: A project's terminal value is the sum of the future values of the cash inflows compounded at the…

Q: When evaluating a project, the best metrics to use are: options: NPV and payback period…

A: Net present value or NPV is a method used to determine the present value of all the future cash flow…

Q: When evaluating projects by the present worth method, how do you know which one(s) to select if the…

Q: How does the Analysis Period Differ from Project Lives?

A: In capital budgeting, the decisions are made to select the best alternative among various available…

Q: What is the required rate of return on the project? (De

A: Capital Asset Pricing Model (CAPM) is a measure used for the measurement of systematic risk. It…

Q: , determine whether the project should be undertaken.

A: Net Present Value=Present Value of Inflow-Present Value of Outflow Present Value of…

Q: t are the problems in using the Internal Rate of Return method when making decisions on which…

A: Internal rate of return is rate at which present value of cash flow is equal to the initial…

Q: Describe the project-screening tool method used to evaluate the investment projects?

A: Following are the project-screening tool method used to evaluate the investment projects: The…

Q: a. Compute the net present value of each project. Which project should be adopted based on the net…

A: Net present value is the result arrived at by subtracting the total outflows in year 0 (or initial…

Q: Describe the method of Investment Decision for a Nonsimple Project?

A: In a simple investment, cash flows change sign only one time. For example, negative cash flow in the…

Q: Payback is best used to evaluate which types of project

A: Payback period is used to calculate the period in which our cash inflows will get equal to our cash…

Q: When faced with a set of independent projects, one should select (choose the best answer) a. all…

A: The net present value (NPV) approach calculates the current worth of all future cash flows generated…

Q: How can we determine the Incremental Analysis for Cost-Only Projects?a

A: Answer: In capital budgeting, incremental analysis is one of the most common decision making methods…

Q: Provide an example of a “good” externality—that is, one thatincreases a project’s true NPV over what…

A: The net present value (NPV) method is a method to ascertain the profitability of an investment in a…

Q: Critically discuss the Expected Net Present Value method (ENPV) and explain why it may be more…

A: Expected Net Present Value method is a method of capital budgeting. Under this method it is…

Q: When evaluating a project, the best metrics to use are: Question 42 options: NPV and payback…

A: There were various financial techniques were followed to evaluate a project. Some are payback…

Q: What is the criteria to accept a project based on the net present value and the internal rate of…

A: Net present value (NPV) Is the difference between present value of all cash inflows and initial…

Q: LO2 Evaluate whether a project is acceptable.

A: Acceptability of the project can evaluated: 1) Net Present Value: Net present value is the…

Q: Describe the Investment Decision for a Nonsimple Project?

A: Answer: In case of simple investment, changes to the cash flow sign can only be made once. For…

Q: Discuss what reason to decide whether to accept or reject a project. Your should refer to all four…

A: Decision regarding whether an investment on a project which a company is willing to take have to…

Q: Illustrate Investment Decision for a Nonsimple Project?

A: Investments: Companies invest in stocks and bonds of other companies or governmental entity to…

Q: Describe the Incremental Analysis for Cost-Only Projects?

A: The incremental cost is the additional cost incurred for producing an additional one unit of a…

Q: What type of projects does the Payback method favor?

A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…

Q: Explain how the Analysis Period Equals Project Lives?

A: Answer: For the present worth analysis, the definition of analysis period equivalent to project…

Q: make the distinction between c

A: Rate of return refers to the percentage of profit or loss on an investment for a specified period…

Q: If a firm can structure a project such that expenditures can be madein stages rather than all at the…

A: When expenditure of any project are made in different stages rather than at the beginning then the…

Q: What is a feasibility study?

A: Feasibility study is a scientific program. Venture achievement proportion is decided by Project…

Q: Consider IRR for a Nonsimple Project: Mixed Investment?

A: Answer: Mixed investment is an investment during the investment period in which a company borrows…

Q: Illustrate the main factors of Project Risk?

A: The project risk is defined as the uncertain event or condition that occurs mainly on positive or…

Q: When can a project may fail the net-investment test?

A: Yes, a firm can initiate the withdrawal of the amount invested from the investment pool in which…

Q: When faced with a set of independent projects, one should select (choose the best answer) all…

A: Positive NPV occurs only when the present value of all inflows is greater than the present value of…

Q: List the factors of time and uncertainty of investment project?

A: Investment projects are a complex environment and there are many risks involved. one of those group…

Q: How do you apply the Net Present Value rule when multiple projects are available and you have the…

A: If the NPV is positive, the project should be accepted. If the NPV is negative the project should be…

Q: feasibility study?

A: Feasibility Study-: A Feasibility Study is a thorough examination of the viability of a program,…

Q: ject a project. Your should refer to all four investment appraisal methods.

A: Capital budgeting is used to decide whether a project should be accepted or rejected. Capital…

Q: Explain Incremental Analysis for Cost-Only Projects?

A: The question is based on the concept of incremental analysis used in capital budgeting.

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A project will be preferred when it has:
a) Higher payback period
b) Lower Payback period
c) Normal payback period
d) None of the above

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Using NPV, a project is rejected if it is a. equal to zero. b. negative. c. positive. d. equal to the required rate of return. e. greater than the cost of capital.
Projects with _____are preferred. O a. Lower payback period. O b. Normal payback period. O c. Higher payback period. O d. Any payback period.
Which of the following is correct? • the shorter a projects payback period, the less desirable the project is normally considered to be by this criterion • one drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period. • if a projects payback is postitive, then the project should be accepted because it must have a positive NPV • the regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem •one drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.
Based solely (only) on the calculated payback periods for each proposal above, which project and why, is management likely to prefer for investment?
Which of the following would cause a project to have a lower net present value, thereby making the project less appealing? A. The discount rate increases B. The cash flows are extended over a longer period of time. C. The investment cost decreases without affecting the expected income and life of the project. d. The cash flows are accelerated and the project life is correspondingly shortened.
What do you know about the mathematical value of the internal rate of return of a project under each of the following conditions? a.The future worth of the project is equal to zero. b. The future worth of the project is less than zero.
Which of the following statement is correct Select one: a. A project is accepted when profitability index will be greater than one b. All statements are correct c. A project is accepted when net present value is greater than zero d. A project is accepted when payback period is less than the other project
Two investment projects are under analysis and, due to budget constraints, only one of them can be selected. The investor should select the project: a. Based on absolute metric of value b. With higher internal rate of returnc. With lower discounted payback period
Please explain why the net present value (NPV) method is preferred over the payback method when evaluating alternative capital budgeting projects.
Which of the following statements is correct regarding the payback method? Takes account of differences in size among projects. If a project’s payback is positive, then the project should be accepted because it must have a zero NPV. Ignores cash flows beyond the payback period. Has an objective, market-determined benchmark for making decisions. Directly account for the time value of money.
The required span of time within which the investment made for the project will be recovered by the net returns of the project is known as Select one: a. None of the option b. Payback period c. Period of return d. Span of return e. No Present Value
If the net present value (NPV) of a project is negative: Group of answer choices accepting the project will decrease the value of the firm. the project is acceptable. the project's discounted payback period is shorter than the useful life of the project. the internal rate of return is high than the firm's required rate of return.