In a maximum of two lines, give an explanation to the following statements: While comparing projects with unequal time frames, evaluation via the equivalent annual net benefit method may be simpler than via the roll-over method.

In a maximum of two lines, give an explanation to the following statements: While comparing projects with unequal time frames, evaluation via the equivalent annual net benefit method may be simpler than via the roll-over method.

Accounting Information Systems

10th Edition

ISBN:9781337619202

Author:Hall, James A.

Publisher:Hall, James A.

Chapter13: Systems Development And Program Change Activities

Section: Chapter Questions

Problem 12P: COST-BENEFIT ANALYSIS Listed in the diagram for Problem 7 are some probability estimates of the...

See similar textbooks

Related questions

Q: What is the IRR of the project? % (Round to two decimal places.) At what adjusted WACCS will the…

A: To find the IRR, we need to solve the following equation: $0 = -9847216 + $2814000 / (1+IRR) +…

Q: How would you compare two different projects using the net present value method?

A: Net Present Value: It is the present worth of the project's initial cost and the cash flows. Hence…

Q: a. Calculate the NPV of each project, using a cost of capital of 15%. b. Rank acceptable projects by…

A: Net Present Value: It is the current worth of the project's annual cash flows and the initial cost…

Q: a. Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks. b. If the…

A: Note : As per the bartelby guidelines only first two parts will be answered. Given information :

Q: Calculate Net Present Value and Actual Rate of return for both the projects.. How will you evaluate…

A: Net present value of the project means difference of present value of all expected cash inflows from…

Q: Consider the following information about a project: Calculate the NPV assuming 10% discount rate…

Q: What is the opportunity cost of selecting a project with an NPV of $22,500 over another project with…

A: We are provided with two projects with net present values of $22,500 and $18,000 respectively.

Q: How the regular payback periods and discounted payback periods for projects are calculated, after…

A: Pay back period As name itself indicates that pay back period means that how much time required to…

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: Suppose the net present values of projects A and B show a distribution as follows. Net Present…

A: Expected NPV (A)=750×0.1+1000×0.15+1250×0.2+1500×0.25+1750×0.3=75+150+250+375+525 Expected…

Q: When faced with alternatives having unequal lives, do the following when calculating the…

A: Benefit-cost ratio The benefit-cost ratio can be defined as a financial ratio used to determine the…

Q: If the net present value of a project is zero based on a discount rate of 16%, then the internal…

A: NPV stands for Net present value, which is described as the difference among the present value of…

Q: When the net present value of a project is equal to zero, the project is operating at the Group of…

A: Net present value (NPV) is the distinction between the PV of money inflows over some stretch of time…

Q: Calculate the Payback Period of Project A (expressed in years, months and days).

A: Solution:- Payback period means the period at which the summation of cash flows from a project are…

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: How did they come up with the Total Project Benefit Costs, Yearly NPV, and Cumulative NPV? We are…

A: Here, To Find: Total Project Benefit Costs =? Yearly NPV =? Cumulative NPV =?

Q: The following information on two mutually exclusive projects is given below: Which of the following…

A: Correct option is (c)- Project B would be a better choice as long as the investor's MARR is lessthan…

Q: The following information on two mutually exclusive projects is given below:n Project A Project B0…

A: The correct statement is (a) Since the two projects have the same rate of return, they are…

Q: The overall rate of return needs to be checked for multiple mutually exclusive projects when only…

A: When decision has to be made while comparing one project with other projects and out of which only…

Q: Evaluate the projects using each of the following criteria, stating which project(s) Insignia…

A: Payback period is the time taken by project cash inflows to recover initial investment. Discounted…

Q: For the reader's advantage, provide a cost-benefit analysis of the project. How can the value of a…

A: An analysis is a systematic procedure used by businesses to determine which decisions to make and…

Q: It is good to compute first the additional benefits that a project can give and the additional cost…

A: Meaning of the given options:: a) Law of supply and demand- The law of demand states that when price…

Q: a. Determine the payback period of each project. b. Which project is acceptable based on payback…

A: Payback period = (Year of last negative cash flow+(Absolute value of last negative cash flow/Next…

Q: Alternatives for constructing a new facility which are mutually exclusive are being considered. The…

A: BC ratio also known as Benefit cost ratio is a measure which values the worth of the investment…

Q: Use the information below and help the management in choosing the most desirable Project using a.…

A: Capital budgeting is referred as the process of decision making which is used by companies to…

Q: find The equivalent annual net benefit of this project in excel.

A: Equivalent Annual Net Benefit =Net Present Value of the project/ Present Value factor for desired…

Q: Can we select projects according to their corresponding payback period?

A: Capital Budgeting is a process which helps the firm to determine the expected cash flows of a…

Q: The analysis of the effect that a single variable has on the net present value of a project is…

A: Sensitivity analysis is also known as what if analysis. It is a tool used to analyze how different…

Q: If the net present value of a project is positive, the project earns a return that is Group of…

A: Introduction: According to the net present value rule, executives and shareholders must only invest…

Q: following estimated benefit and cost. By using NPV method, select the project and consider WACC 8%…

A: Net Present Value: Net present value is the measure of profitability in dollar amounts of a project…

Q: Three alternatives identified as X, Y, and Z were evaluated by the B/C method. The analyst…

A: Benefit cost analysis helps managers to calculate the costs and benefits of a project. It is the…

Q: COST-BENEFIT ANALYSIS Listed in the diagram for Problem 7 are some probability estimates of the…

A: Net Present Value (NPV) is a capital budgeting method and investment planning support to estimate…

Q: Calculate discounted payback period of Project A and B Calculate net present value of A and B Which…

A: solution cash flows given year cash flow A cash flow B 0 -150000 -150000 1…

Q: Find the external rate of return (ERR) for the following project when the external reinvestment rate…

A: External Rate of return(ERR) refers to the rate of return which directly measures all the cash…

Q: Calculate cach project's Payback Peried. Based on the payback periods, which project(s) should they…

A: Payback Period: It is the period in which the investment or project recovers its initial cost. A…

Q: For any given project completion time less than the normal time, a ___________ of possibilities…

A: Cost is the price at which a good or service can be purchased.

Q: (a) Calculate the payback period of each project. ( ) (b) Compute the net present value of the two…

A: Payback Period: It is the period in which the project returns its initial outlay/cost. The lower…

Q: The benefit-cost ratio of a project represents its time-valued benefit per unit investment (first…

A: The question is based on the concept of Accounting Theory.

Q: Assume a project has three variables: life, first cost, and annual cost. Assume there is no salvage…

A: The net present worth also known as the net present value calculated the difference between the…

Q: a. calculate the payback period for each project. b. calculate the net present value for each…

A: Payback period is the time required to recover the cost of investment. Payback period = ((Year of…

Q: When evaluating a project with non-normal cash flows (cash flows change sign for at least two times…

A: The internal rate of return method is a advancement upon internal rate of return method which will…

Q: Select the feasible alternative by using present value method and Equivalent annual cost method.

A: Equivalent annual cost represents the total cost which must be incurred on annual basis for the…

Q: Can the IRR measure also be used to compare projects with unequal lives as long as we can establish…

A: Yes, the IRR measure can also be used when the project has unequal lives but a common study period…

Q: The length of time required to cover the initial outlay of the investment in a project is referred…

A: There are different methods of capital budgeting which help a manager take decision regarding the…

Q: Compute annual rate of return, Pay back period b NPV using 14% discounts rate , Is the Project…

A: Information Provided: Discount Rate = 14%, 11% Cost of equipment = $364,000 Salvage value = $12,000…

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

In a maximum of two lines, give an explanation to the following statements:

While comparing projects with unequal time frames, evaluation via the equivalent annual net benefit method may be simpler than via the roll-over method.

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

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, accounting and related others by exploring similar questions and additional content below.

Similar questions

Three alternatives identified as X, Y, and Z were evaluated by the B/C method. The analyst calculated project B/C values of 0.92, 1.34, and 1.29. The alternatives are listed in the order of increasing equivalent total costs. The analyst is not sure whether an incremental analysis is needed. (a) What do you think? If no incremental analysis is needed, why not; if so, which alternatives must be compared incrementally? (b) For what type of projects is incremental analysis never necessary? If X, Y, and Z are all this type of project, which alternatives should be selected based on the calculated B/C values?
Explain with example Annual Equivalent Cost Comparison with Unequal Project Lives?
Calculate the Payback Period of Project A (expressed in years, months and days) Calculate the Accounting Rate of Return on average investment of Project A (expressedto two decimal places). Calculate the Benefit Cost Ratio of both projects (expressed to two decimal places). Which project should be chosen? Why? Calculate the Internal Rate of Return of Project B (expressed to two decimal places). Youranswer must include two net present value calculations (using consecutiverates/percentages) and interpolation.
Use these data to compute for each (a) the NPV at discount rates of 10 and 5 percent, (b) the BCR at the same rates, and (c) the internal rate of return for each. Describe the facts about the projects that would dictate which criterion is appropriate, and indicate which project is preferable under each circumstance.
From the following data, calculate the (a) conventional and (b) modified benefit/cost ratios using a discount rate of 6% per year and a very long (infinite) project life.
Compare and contrast different project evaluation methods, including net present value (NPV), internal rate of return (IRR), and payback period. When is each method most suitable for project analysis?
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
When using the benefit–cost method of analyzing a project, which of the following is a true statement? (a) It will always produce a recommendation consistent with the simple payback period method. (b) It will always produce a recommendation consistent with present worth, future worth, and annual worth methods. (c) It can be used only to evaluate projects from the public sector (such as bridges and roadways). (d) None of the above.
COST-BENEFIT ANALYSIS Listed in the diagram for Problem 7 are some probability estimates of the costs and benefits associated with two competing projects. a. Compute the net present value of each alternative. Round the cost projections to the nearest month. b. Repeat step (a) for the payback method. c. Which method do you think provides the best source of information? Why?
Use the information from the previous exercise to calculate the Internal Rate of Return on both projects and make a recommendation regarding which one to accept.
Compute the IRR, NPV, PI, and payback period for the following two projects. Assume the required return is 12%. See the table attached.
If the net present value of a project is positive, the project earns a return that is Group of answer choices - equal to the required rate or return - greater than the required rate of return - equal to the accounting rate of return - greater than the accounting rate of return