LO3 Discuss the discounted payback rule and some of its shortcomings. LO4 Explain accounting rates of return and some of the problems with them.
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- In actual practice, managers frequently use the: I. average accounting return method because the information is so readily available II. internal rate of return because the results are easy to communicate and understand III. discounted payback because of its simplicity IV. net present value because it is considered by many to be the best method of analysisI. Explain the tradeoff between the costs of having too much liquidity on the one hand and financial distress and insolvency on the other hand. II. What gives rise to, or causes, each. III. Give an example explaining both.Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?
- Explain the payback period model and its two significant weaknesses. How does the discounted payback period model addresses one of the problems?Which of the following is a disadvantage of the average rate of return method? a. fails to consider the time value of money b. includes the amount of income earned over the entire life of the proposal c. emphasizes accounting income d. difficult to useWhich of the following statements about payback (payback period) is most correct? a. Payback is a measure of time breakeven. b. Payback is a rough measure of risk. c. Payback is a rough measure of liquidity. d. Both a. and b. are correct. e. Answers a., b., and c. are all correct.
- This solution seems to be wrong. I also do not see where you got your numbers for the percentage return. Please continue to assist me.Need help with a and b as well as the last question on whether the internal rate of return is the same as discount rateHi, can you find pro and cons on this statement? And please explain in detail. A sound risk mitigation plan improves the DCF, as it lowers the risk premium in the discount factor.
- 1. Define the Myopia Problem and Discuss 2 solutions to the myopia problem? ****Pls note tyhis question is not about the short signtness of EYE, its a finance/performance management question****The pricing efficiency of financial markets can be expected to decrease if the cost of skillful financial analysis increases. True FalseAll of the following statements about an efficient market are correct EXCEPT: a. All financial transactions have an NPV of equal to zero b. A skilled individual may have sustainable above market returns c. The investor is compensated properly for risk borne d. The investor does not receive abnormal returns consistently
