How is the project profitability index computed, and what does it measure?

Q: Is the net-investment test the only way to accurately predict projectborrowing?

A: Net investment refers to the total amount of money that a company invests in capital assets which is…

Q: What is the profitability index of this project?

A: Profitability index is one of the capital budgeting method which helps in rejecting or accepting the…

Q: (a) Compute the profitability index for each project. (b) Based on the profitability index, which…

A: It's a method of capital Budgeting.  It helps us to know whether a project must be accepted or…

Q: requirea: 1. Compute the project profitability index for each project. ord

A: Profitability Index = (Net Present Value + Initial Investment)/Initial Investment…

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: What is project financing? What are its advantages and disadvantages?

A: Project financing: It is a type of subsidizing for the most part foundation overwhelming,…

Q: How can we aggregate the risk over the project life in terms of net present value?

A: It is an incorporation of the risk level of the project over the life of the in terms of NPV by way…

Q: Explain Project Feasibility and Profitability?

A: It is a study containing an itemized portrayal of the project, trailed by a lot of various…

Q: What is the total investment approach?

A: Total Investment Approach: In the Total Investment Approach, there is a risk-return tradeoff in the…

Q: How the Income-Tax Rate to Be Used in Project Evaluation?

A: The income tax rate is used to determine the cash flow after tax. As cash flow after tax helps in…

Q: What are the factors affecting the discount rate used in project valuation?

A: Higher discount rate provides less value and lower the discount rate higher the value of the…

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: what is net present value in project management?

A: Net present value (NPV) is an important technique that is been used by the project manager in order…

Q: What is an internal rate of return and what advantages and disadvantages are accrued by using it to…

A: IRR or Internal rate of return measures the rate of return of projected cash inflows generated by…

Q: Under what circumstances will you prefer profitability index to NPV as project evaluation…

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

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: How can the Income-Tax Rate be used in Project Evaluation?

A: The income tax rate is used to determine the cash flow after tax. As cash flow after tax helps in…

Q: Describe the process of using the Income-Tax Rate in Project Evaluation?

A: The income tax rate is used to determine the cash flow after tax. As cash flow after tax helps in…

Q: Which is the most accurate and commonly-used Investment Appraisal Method?

A: The profitability criteria of a project over the other can be considered by doing an analysis, that…

Q: Are the following capital budgeting or financing decisions?

A: Capital budget involves the evaluation and comparison of costs and benefits from a project. Capital…

Q: What is project financing?

A: Project financing is an opportunity to finance long-term, nil, or restricted capital accessible to a…

Q: What is the Incremental (Marginal) Tax Rate in Project Evaluation?

A: Tax:   A tax is a compulsory charge or a levy imposed upon a taxpayer by a government organization…

Q: ions used in the

A: Before making any investment the analysis of the future outcomes becomes necessary. Capital…

Q: When is a project is said to be a net investment?

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Q: How do the Analysis Period Equals Project Lives?

A: It is PW analysis's best situation. Set the study time to suit the lives of options, in which all…

Q: What does each of the following definitions refer to:                                        The…

A: Expected future cash flow streams and immediate streams of expenditure are very important for…

Q: ) What are the factors affecting the discount rate used in project valuation?

A: Discount rate also called as Weighted average cost of capital is used for discounting future cash…

Q: How is the Rate of return is an intuitively familiar and understandable measure of project?

A: Company enters into diversification once it reaches a profit level. Expanding the business is part…

Q: Why is it important to make the distinction between company required rate of return (WACC) and…

A: WACC is the weighted average rate of return. It is the average cost of funding for a company.…

Q: What are the various costs that must be evaluated in a capital budgetingdecision?

A: Capital budgeting is the process of planning to make a decision to invest in long period investments…

Q: Which investment return, expected or actual, does GAAP allow in the calculation of benefit cost?

A: Benefit cost: When an entity creates a benefit plan setting aside some moneys to meet future…

Q: What it the profitability index for investment project O?

A: Profitability Index = Present Value of cash flows / Initial investment  =$102,500 / $95,000 =1.079

Q: Which provides a better estimate of a project’s “true” rate of return, the MIRR or theregular IRR?…

A: Internal rate of return (IRR): The internal rate of return (IRR) is a measure utilized in capital…

Q: What is a true indicator of the project's profitability?

A: Answer: Capital budgeting is the whole project investment process and the decision of whether it…

Q: what is the cost of a project proposal and how is it structure to meet its goals

A: A cost of a project refers to the sum total of all expenditure to be incurred by an organization for…

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: How can we determine the required capital investment for an investment project?

A: Estimation of the capital investment is required because this is the foremost decision while…

Q: What are the components of the weighted average cost of capital that a company should use for…

A: Weighted average cost of capital is the firm’s cost of capital by considering all the capital…

Q: Define the term Net Future Worth and draw a Project Balance Diagram?

A: Time value of money refers to the worth of the amount received today is more than the worth of the…

Q: Explain Net Future Worth and Project Balance Diagram?

A: Net future worth is future value of the current assets at some future specific date, it is…

Q: What is a sunk cost, and if included in a project how should they be treated?

A: Sunk cost is the cost which is already incurred and it is not relevant for decision making. Examples…

Q: What is the project's internal rate of return?

A: Answer has been given in the next sheet.

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.