For a capital investment project to be acceptable, it must generate a rate of return  A) Less than the required rate of return B) Equal to or greater than the cost of capital C) equal to the initial investment D) none of the above

Q: Select the incorrect statement concerning the internal rate of return (IRR) method of evaluating…

A: Internal rate or return or IRR is the method of capital budgeting which is determined and compared…

Q: Assuming that your capital is constrained, which project should you invest in last?

A: Here we will have to use the PI (profitability index) ratio. We know that profitability index = 1 +…

Q: Which of the following statements regarding capital budgeting analysis is correct?     NPV assumes…

A: Capital budgeting is the process of making investment decisions by a company in which different…

Q: How can we use the internal rate of return to evaluate whether we should pursue a specific project?…

A: It is important for the investors to evaluate the project in all aspects before making any…

Q: We should accept a project if the Net Present Value is positive and the Internal Rate of Return is…

A: Net present value is referred as the difference between the cash inflow's present value and also…

Q: Determine the Cost of Capital (k) Using NPV and IRR method, give your recommendation if the company…

A: Net Present Value: It is a method of capital budgeting used by project managers to measure a…

Q: If you were to choose a method or combination of methods to assess the viability of a capital…

A: There are several methods listed to assess the viability of capital projects and explained below:…

Q: Explain how a net present value (NPV) profile is used to compare capital projects. How does this…

A: NPV also known as net present value is basically the present  value of all the future cash flows.…

Q: Discuss the connection between capital budgeting decisions and the enterprise’s cost of capital.…

A: The connection between capital budgeting decisions and the enterprise’s cost of capital: Capital…

Q: What is the NPV decision rule for discretionary mutually exclusive projects? A. Accept the project…

A: There are two types of projects: Independent projects. Mutually exclusive projects. Independent…

Q: Please explain why the net present value (NPV) method is preferred over the payback method when…

A: NPV method is preferred over payback method because of following reasons 1. NPV method shows project…

Q: If a net present value analysis for a normal project gives an NPV greater than zero, an internal…

A: NPV greater than 0

Q: If net present value for a project is negative, then____. a. IRR is equal to Cost of capital b. IRR…

A: Net present value is the difference between the present value of cashflows discounted at the cost of…

Q: Critically assess how a failed capital project may also shape the future strategy of investment…

A: Capital projects are nothing but a long-term capital-intensive initiative aimed at expanding on,…

Q: How can the working-capital requirements significantly reduce a project's profitability or rate of…

A: More risky investments would bring about more returns. In this manner, an organization with high…

Q: All of the following are factors that may complicate capital investment analysis except a.changes in…

A: Capital Investment - It refers to the money invested in the business for the purchase of fixed…

Q: Should capital budgeting decisions be made solely on the basis ofa project’s NPV, with no regard to…

A: Net present value is a method of capital budgeting. In this technique, the current estimation of…

Q: Which of the following is NOTa relevant cash flow and thus should not be reflected in the analysis…

A: Sunk cost is the cost that has been incurred and it would not be recovered in future. It depends on…

Q: Consider the following statement: In a capital rationing problem withdivisible investments, if all…

A: Capital rationing is a technique used in capital budgeting to maximize profitability by restricting…

Q: Should capital budgeting decisions be made solely on the basis of project’s NPV?

A: Net present value is the method of capital budgeting, under this method the present value of future…

Q: Which of the statements below describes the correct capital budgeting decision rule? O A. Reject a…

A: Capital Budgeting Capital budgeting refers to different techniques used to evaluate the project.…

Q: Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a…

A: Capital investment is defined as an amount, which used to get invested in the corporation for…

Q: Which of the following is not a variable when setting the project bid price. Multiple Choice   Risk…

A: Net present value  It  is the difference between the present value of cash inflows(Discounted value)…

Q: true or false? if we choose to use company's WACC in the calculation of the NPV of a project, we are…

A: Answer: True

Q: Under what circumstances the cross over rate will be an important point in capital budgeting. Can it…

A: Capital Budgeting is a process in which the company decided on the project investments which would…

Q: The goal of the capital budgeting decisions is to select capital projects that will decrease the…

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

Q: Which of the following is NOT relevant to the evaluation of a proposed project? Incremental cash…

A: While eveluating a project all the initial cash flows and subsequent cash flows are considered. All…

Q: Which of the above statements are correct?

A: Net Present Value: It is the present value of the annual cash flows and the initial cost of the…

Q: Relate the idea of cost of capital to the opportunity cost concept. Is the cost of capital the…

A: The total cost of financing current projects (or projects under consideration) will be the financial…

Q: Which of the following statements regarding the net present value rule and the rate of return rule…

A: The question is based on the concept of Financial analysis.

Q: hich methods of evaluating a capital investment project ignore the time value of Multiple Choice Net…

A: A Capital Investment project refers to the expenses involved in a project which will eventually help…

Q: Help question 21

A: Rate of return is a profit of an investment over a specified period of time, expressed as…

Q: When two mutually exclusive projects are being compared, explain whythe short-term project might be…

A: Mutually exclusive projects are the projects with same purpose. Hence, a company chooses only one…

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: According to the profitability index criterion, a project is acceptable if its profitability index…

A: PI = Present value of future expected cash flows / Initial investment amount in the project.

Q: When and under what conditions the cross over rate will be used will be an essential consideration…

A: Introduction: The process through which the corporation decides on the project investments that will…

Q: How can we measure the true rate of return of any internal portion of an investment project?

A: True rate of return means real rate of return on investment. It is the actual return earned on an…

Q: In capital budgeting decisions, are there reasons a company might choose to take a project that was…

A: Net present value (NPV) is value of all future cash flows discounted to the present value by either…

Q: Should capital budgeting decisions be made solely on the basis of a project’s NPV?Explain.

A: Capital budgeting decisions are based on various factors in which NPV is one of the factors which…

Q: Which of the following statements is (or are) true? (Select all correct responses.] O For a…

A: Correct statements are; 1)  2) 4) 5)

Q: The relationship between NPV and IRR is such that a. both approaches always provide the same ranking…

A: IRR is the required rate of return for the project to have zero Net Present value.   Net present…

Q: Discuss the advantages and disadvantages of using the Internal Rate of Return method for analyzing…

A: For the purpose of evaluating the capital investments, the company will make use of different…

Q: State two assumptions when doing capital rationing using a PW analysis for unequal-life projects.

A: Introduction: The planned structure of the revenue’s cost is known as the budget. The projects that…

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.