Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.

Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 11MCQ

See similar textbooks

Related questions

Q: If cashflows are discounted @ the net present value is zero. O a. RATE OF BORROWING…

A: Capital budgeting is the process by which a corporation examines potential large projects or…

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: When calculating the present worth of a uniform series using the relationship P = A(P|A, i%,n), the…

A: P equals to A times the factor of P over A and this factor known as the Uniform Series of Present…

Q: _______ is a measure of risk while _______ is a measure of risk and liquidity.

A: Capital budgeting is the process of distributing the resources(finance) of the organization in…

Q: the discount rate that equates the present value of the cash inflows with the present value of the…

A: In capital budgeting decisions calculate net present value is very important.

Q: h flows meani

A: The amount of cash and the cash equivalent that the company receives or gives by the way of payment…

Q: If you disounted a set of positive real cash flows with a nominal discount rate and inflation were…

A: Justification:Suppose the positive cash flows are discounted with the inflation rate, which is…

Q: Define the term reinvestment rate and describe how it differs for any cash flow series between (1) a…

A: Answer: Rate of return is nothing but the interest rate paid on the outstanding balance of money…

Q: 3. When there is more than one sign change in the net cash flow of a rate of return equation, the…

A: Cash flow streams are the net cash inflows and outflows of an organizations, for any project. A cash…

Q: at is the cash price of the

A: Redeemable bonds refer to the bond which is redeemed and paid off by the issuer before the bond’s…

Q: Which of the following situation is better for the company? O a. All of these O b. Cash conversion…

A: The cash conversion cycle (CCC) is the days of inventory plus the days of receivable less the days…

Q: Discounting an investment’s cash flows using the internal rate of return will result in which of the…

A: Introduction: The internal rate of return (IRR) is a research and consulting metric used to assess…

Q: Describe the strengths and weeknesses of the following:: Cash payback period Adverage accounting…

A: As you have given multiple questions, first 3 will be answered. Please re-post the question for…

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: All of the followings are True when the net present value method is used to choose between two…

A: Net present value is the excess of present value of cash flows over cash outflows or initial…

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: Payback method is Select one: a. None of the options b. Yield on investment c. PV of cash inflow- PV…

A: Payback method is one of the capital budgeting technique which helps in evaluating profitability of…

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: 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: oose the correct option- "This is the rate at which present value of cash inflows are equal to the…

A: Net present value or NPV is excess of present value of cash inflows over present value of cash…

Q: Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM…

A: Present Value(PV) is value of a future amount at current point of time. It is done by discounting…

Q: resent and Future Values of Single Cash Flows for Different Periods Find the following values,…

A: Formulas to calculate present values and future values are PV = FV / (1 + r / n)nt FV = PV* (1 + r /…

Q: Two projects, A and B, are analyzed using ranking present worth analysis with MARR at i%. It is…

A: Cash flow is the amount of cash equivalent that the company gets or receives or gives out through…

Q: c. Use arrows to demonstrate, on the time line in part b, how discounting to find present value can…

A: NPV or Net present value method is a capital budgeting method to compare any two or more similar…

Q: The formula to compute free cash flow is

A: The formula to compute free cash flow is here:

Q: Label each of the following statements as either true (“T”) or false (“F”). An out-of-pocket cost…

A: Relevant costs: These costs can be defined as the costs that can be avoided if we choose over option…

Q: Find the following values, using the equations, and then work the problems using a financial…

A: Present Value: The idea of present value asserts that a sum of money in the here and now is worth…

Q: Explain your answer assuming that all variables are constant except for the one mentioned:

A: Capital budgeting is a method used for finding the profitability of investment proposals. This…

Q: 7) An investment has a net cash flow (ao, a1, az, as, and a.) with ao, a,, az negative, a, > 0, and…

A: (7). The given investment is a case of unconventional cash flows wherein there are more than one…

Q: Write the Interest Formulas for Single Cash Flows?

A: Time value of money: Time value of money refers to the concept that the value of money available at…

Q: How can we compute incremental cash flow, and IRR?

A: Incremental cash flows and IRR, both are the terms of Capital Budgeting decisions. Incremental cash…

Q: To find NPV, it requires

A: NPV or net present value technique is used to determine the present value of all future cash flows.…

Q: Incremental cash flow is calculated as (cash flowB− cash flowA), where B represents the alternative…

A: Incremental cash flows are the cash flows that are left after meeting initial cash requirements as…

Q: What cash flows are associated with Descartes’ rule of signs and Norstrom’s criterion?

A: Cash flows series can be of two types i.e. non-conventional and conventional cash flow series. Non…

Q: Consider two assets with the following cash flow streams: Asset A generates $4 at t=1, $3 at…

Q: The rate of return that equates the present value of cash inflows and outflows is the: A. hurdle…

A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…

Q: The discounted payback method considers the time value of money as well as the cash flows after the…

A: Introduction: This question is related to the concept of capital budgeting. It is nothing but an…

Q: a. What is the simple payback period for Alternative 1? b. What is the annual worth of Alternative…

A: As per policy we answer only 3 sub questions in a single question. Please repost the unanswered…

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: te

A: Introduction : The given question relates to the capital budgeting techniques which are used to…

Q: All of the following are true statements about the a gradient series of cash flow except the…

A: A gradient series is a cash flow series that either increases or decreases by a constant amount each…

Q: The present value of an investment's future cash flows divided by its initial cost is the: O Net…

A: The present value of an investment is calculated by applying the time value of money concept to the…

Q: Which figure of merit provides an interest rate at which the present value of the future cash flows…

A: IRR It is a rate at which the amount of investment equals to PV of the future CF. It is a…

Q: For the below cash flows: (a) Determine the number of positive roots to the rate of return relation…

A: Note that the first and last values are negative so there are two sign changes, from EOY 0 to EOY 1…

Q: 3. When there is more than one sign change in the net cash flow of a rate of return equation, the…

A: Based on the pattern of the cash flows, the cash flows can be classified as a conventional cash flow…

Q: Which of the following statements correctly describe how the present value of a future expected cash…

A: The present value of future cash flows is the value which is derived by discounting the future cash…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Point 1 is not correct as IRR is not found using this method. Cash flows cannot be compounded at…

Question

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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

Step 1: INTRODUCTION

VIEW

Step 2: SOLUTION

VIEW

Step 3: SOLUTION

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 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

The IRR method assumes that cash flows are reinvested at _________. A. the internal rate of return B. the companys discount rate C. the lower of the companys discount rate or Internal rate of return D. an average of the internal rate of return and the discount rate
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
When 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 low
The expected period of time that will elapse between the date of a capital investment and thecomplete recovery of the amount of cash investedis called: A.The average rate of return period B.The cash payback period C.The net present value period D.The internal rate of return period
Which of the following does nor assign a value to a business opportunity using time-value measurement tools? A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. payback period method
Which of the following statements are correct? The internal rate of return (IRR) generated by a positive cash flow stream of n payments. (a)is always smaller or equal than +1 (b)is always given by the solution of a quadratic equation (c)is always bigger or equal than -1 (d)can be 17 for a suitable cashflow (e)can be -2 for a suitable cashflow
The rate of return that equates the present value of cash inflows and outflows is the: A. hurdle rate.B. desired rate of return.C. internal rate of return. D. minimum rate of return.
Define the term reinvestment rate and describe how it differs for any cash flow series between (1) a PW value calculated at the MARR, and (2) the IROR value i*.
Select all the correct statements. The internal rate of return (IRR) generated by a positive cash flow stream of n payments a. is always given by the solution of a quadratic equation b. is always bigger or equal than -1 c. can be -2 for a suitable cashflow d. can be 17 for a suitable cashflow e. is always smaller or equal than +1
The internal rate of return is: the discount rate that equates the present value of the cash inflows with the present value of the cash outflows. the discount rate that makes NPV negative and the PI greater than one. the rate of return that makes the NPV positive. the discount rate that makes the NPV positive.
The Profitability Index (PI) is a financial metric that depends only on the Present Value (PV) of expected future cash inflows. This statement is: a False. b Only partly true. c True d Only partly false.
1. _______________ is the process of determining the future value (FV) of a cash flow or a series of cash flows, while _________________ is the process of finding the present value (PV) of a future cash flow or series of cash flows. A. Calculating, accounting. B. Discounting, compounding. C. Compounding, forwarding. D. Compounding, discounting.