An investment with a positive total cash flow will always outperform an investment that shows negative cash flow in the first years of operation. A.   True B.   False

Q: As the number of compounding periods increases on a fixed investment, the amount of money in the…

A: The compounding period is the time period between, when the interest compounded last time and when…

Q: When using the NPV method for a particular investsment decision, if the present value of all cash…

A: NPV stands for Net present value. It is a method used to evaluate the feasibility of the project.…

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: A conservative approach to reinvesting projected cash flows (the reinvestment assumption) would use…

A: “Hey, since there are multiple different questions posted, we will answer first question. If you…

Q: An increase in the discount rate will____ a. Reduce the present value of future cash flows b.…

A: Present Value of Cash Flows = Cash Flow(1+i)n

Q: Which of the following statements is false? (You may select more than one answer.)a. The payback…

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: The risk-return trade-off from investing in current assets refers to an increased risk of:   a.…

A: Explanation:- The risk-reward difference is an exchange concept that connects large risk and large…

Q: Suppose an investment has conventional cash flows with positive NPv. How would it impact your…

A: NPV is the net present value of a project. When the net present value of a project is positive in…

Q: Assume a project has normal cash flows (i.e. the initial cash flow is negative and all other cash…

A: Option B) - All else equal, a project's N.P.V increases as the cost of capital declines.

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: What can you say about the investment's projected rate of return if the present value of the…

A: In this we have to determine interest rate is below or above the given interest rate.

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: Negative net operating income implies a negative free cash flow investors. True or false

A: Cash flow statement is the cash inflows and outflows during the year. It includes all the…

Q: All of the following statements regarding NPV are true EXCEPT: a. A positive NPV indicates the…

A: Net Present Value : It is the net of present value of cash inflow and present value of outflow.…

Q: Which of the following statements are true regarding the payback period of an investment? It does…

A: Answer: The correct option is (4) All of the above.

Q: The most accurate way to analyze the profitability of an investment is to compute the payback…

A: Payback period is the period for time taken of project to repay the initial investment. Payback…

Q: An increase in the discount rate will______ O a. Reduce the present value of future cash…

A: This question can be solved with the help of 2 examples. Example 1 Initial investment=15000 Discount…

Q: Calculating the payback time is the most precise technique to determine the profitability of an…

A: Payback technique helps us to compute the time period in which the project's cash inflows cover the…

Q: What is the effect of changes in cash flows, investment cost and cash outflows on profitability…

A: Profitability Index is the ratio that is resulted from dividing the current worth of subsequent year…

Q: In computing the present value of an investment in equipment, the present value of the residual…

A: Net Present value = Present value of future cash flows + Present value of terminal cash flow -…

Q: When npv is negative, the discount rate is greater than the actual return on investment. A.…

A: Net present value is the method used in capital budgeting to analyse various investments, projects,…

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: During the operating phase but before tail phase of the project "unlevered free cash flow" is…

A: Unlevered free cash flow can be computed before the payment of interest. It refers to the cash flows…

Q: The Payback method takes the initial investment and divides it by the accelerated depreciation per…

A: Payback Period : The Payback Period is a Period in which a project repay its initial cost of…

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: A disadvantage of using the payback period to compare investment alternatives is that it a. Ignores…

A: Investment decision: Investment decision can be referred to as capital budgeting. It involves…

Q: If net present values are used to evaluate two investments that have equal costs and equal total…

A: Net Present Value is determined by discounting net cash flows by an appropriate required rate of…

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: Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two…

A: IRR or Internal rate of return is the annualized rate of return for an project with expected cash…

Q: You plan to analyze the value of a potential investment by calculating the sum of the present values…

A: The present value of cash flows is computed by discounting the future cash flows with the relative…

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: Since a financial manager prefers to receive cash flows as fast as possible,____. A. a longer…

A: The pattern of cashflows can be significantly affected by the depreciable life of an asset.

Q: If cashflows are discounted at____ the net present value is zero   a. Internal rate of return…

A: Capital Budgeting entails long-term planning and monitoring of capital expenditures, as well as a…

Q: A mature and stable company will likely have positive investing cash flows. O Thue O False

A: Cash flow statement means the statement which shows the cash flow in or out of business enterprises…

Q: Payback is considered an unsophisticated capital budgeting technique because it a) gives explicit…

A: Capital budgeting is the method through which corporations make decisions of the acceptance and…

Q: A graph of the discounting process shows how the present value of any sum to be received in the…

A: Present value = Future value / (1+rate)^years

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 profitability index O will never be greater than 1. O does not take into account the discounted…

A: The profitability index helps to compare the project. It measure the attractiveness of the project.…

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: When a capital investment is expected to provide unequal annual cash inflows, the payback period…

A: Payback period: It can be defined as the time that investment takes before it starts generating…

Q: Discounted cash flow capital budgeting techniques do not O take into consideration an unconventional…

A: Discounted cash flow method is a vital capital budgeting technique. It has been explained in the…

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.