International Financial Management

14th Edition

ISBN: 9780357130698

Author: Madura

Publisher: Cengage

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Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore investors require a higher expected

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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

The house money effect is used to explain the tendency of investors to take higher risks when reinvesting profit earned than when they are investing their savings or initial capital
Select one:TrueFalse

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When comparing NPV and IRR, which is incorrect?
With NPV, the discount rate can be adjusted to take into account increased risk and the uncertainty of cash flows
With IRR, cash flows can be adjusted to account for risk
NPV can be used to compare investments of various size or magnitude
Both NPV and IRR can be used for screening decisions

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For Discounted Cash Flows to be useful, individual investors and companies must estimate a discount rate and cash flows correctly.
Select one:
a. True
a. False

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Investing is a risky business, so investors must be ready to accept that future investment cash flows may be uncertain and unpredictable. This being case, what is the best way to evaluate the value of such an investment?
A. Determine the future value of the individual anticipated cash flows at a minimum acceptable rate of return
B. Convert the individual future cash flows in a perpetuity and determine the present value of the perpetuity
C. Convert the individual future cash flows into an annuity and determine the present value of the annuity
D. Determine the present value of the individual anticipated cash flows at a minimum acceptable rate of return

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The amount of time needed to recoup one's initial investment is referred to as the payback period, and it is also the amount of time required for an investor to reach the point when they are no longer losing money. Investments with shorter payback periods are considered more desirable, whereas those with longer payback periods are seen as less desirable.
Imagine that you are the Chief Financial Officer. Critically evaluate the use of cash payback method (advantages and disadvantgaes) in determining the investment decisions with sufficient cash flow to ensure business sustainability in a competitive environment.

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Explain with an example of how we can balance cash investments?

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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

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When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________.
Group of answer choices
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

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Why is it so hard for actively managed funds to generate higher rates of return than passively managed index funds having similar levels of risk? Is there a simple way for an actively managed fund to increase its average expected rate of return?

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True (t) or False (f)
______ Short-term, highly liquid investments may be included with cash on the balance sheet.

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An investment is a current commitment of money for a period of time, in order to derive future payments that will compensate for, the time the funds are committed, expected rate of inflation and uncertainty of future flow of funds
Select one:
True
False

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Which of the following is not a reason for risk and uncertainty in capital budgeting?
a.
Decisions are based on expected cash flows
b.
All decisions are based on forecasts
c.
Decisions are based on past cash flows
d.
All forecasts are subject to uncertainty
Clear my choice

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