Select all that are true with respect to terminal value. Group of answer choices Terminal value is the value of the project as of the end of the forecast horizon Terminal value is the estimate of what you could sell the project for at the end of the forecast horizon Terminal value is the present value of all cash flows beyond the forecast horizon as of the end of the forecast horizon Terminal value can be safely ignored as it rarely affects decision making

Select all that are true with respect to terminal value. Group of answer choices Terminal value is the value of the project as of the end of the forecast horizon Terminal value is the estimate of what you could sell the project for at the end of the forecast horizon Terminal value is the present value of all cash flows beyond the forecast horizon as of the end of the forecast horizon Terminal value can be safely ignored as it rarely affects decision making

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Description: Select all that are true with respect to terminal value.Group of answer choicesTerminal value is the value of the project as of the end of the forecast horizonTerminal value is the estimate of what you could sell the project for at the end of the for

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter16: Country Risk Analysis

Section: Chapter Questions

Problem 20QA

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Define each of the following terms: Project cash flow; accounting income Incremental cash flow; sunk cost; opportunity cost; externality; cannibalization; expansion project; replacement project Net operating working capital changes; salvage value Stand-alone risk; corporate (within-firm) risk; market (beta) risk Sensitivity analysis; scenario analysis; Monte Carlo simulation analysis Risk-adjusted discount rate; project cost of capital Decision tree; staged decision tree; decision node; branch Real options; managerial options; strategic options; embedded options Investment timing option; growth option; abandonment option; flexibility option
Now assume that the equipments residual value could be as low as 0 or as high as 400,000, but 200,000 is the expected value. Because the residual value is riskier than the other relevant cash flows, this differential risk should be incorporated into the analysis. Describe how this could be accomplished. (No calculations are necessary, but explain how you would modify the analysis if calculations were required.) What effect would the residual values increased uncertainty have on Lewis lease-versus-purchase decision?
Suppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table. Solve, a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates forthese two factors, assuming all other factors to be at their most likely values.
Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC. b. The NPV of a relatively low-risk project should be found using a relatively high WACC. c. If a project's NPV is less than zero, then its IRR must be less than the WACC. d. The lower the WACC used to calculate it, the lower the calculated NPV will be. e. If a project's NPV is greater than zero, then its IRR must be less than zero.
Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. Select one: a. The lower the WACC used to calculate it, the lower the calculated NPV will be. b. If a project's NPV is greater than zero, then its IRR must be less than zero. c. The NPV of a relatively low-risk project should be found using a relatively high WACC. d. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC. e. If a project's NPV is less than zero, then its IRR must be less than the WACC.
1. Which of the following is not true? Group of answer choices The method in which we calculate a project’s Internal Rate of Return (IRR) is called the Discounted Cash Flow approach. The Payback period can be calculated using the discounted (present) values of future cash inflows. The Payback period calculated using this method is what's called the Discounted Payback Period. The Net Present Value is calculated using the present value of the investments and future cash inflows. None of the above (all of the above are correct)
Which of the following statements is most correct? If a project’s internal rate of return (IRR) exceeds the cost of capital, then the project’s profitability index must be positive. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the IRR. Group of answer choices Only statements I and II are incorrect. None of the statements above is incorrect. Only statement II is correct. Only statement I is correct. Only statement III is incorrect.
dentify if each of the following would be included or excluded in forecasting cash flows for a project. Synergies (positive externality) Opportunity costs Sunk costs Cannibalization (negative externality)
Under Net present value criterion, a project is approved if Select one: a. If present value is zero b. None of the option c. Its net present value is positive d. If present value of cash outflow is higher than inflow e. Its net present value is negative
Compute the discounted payback statistic for Project y and recommend whether the firm should accept or reject the project with the cash flows shown as follows
Please answer each of the following questions in detail. Make sure to provide examples for each of the questions below. Describe and explain the significance of each of the following: payback period, internal rate of return (IRR), modified internal rate of return (MIRR), net present value (NPV), and profitability index (PI). Explain. Provide examples for better clarity.Discuss the notions of conventional and nonconventional cash flows in capital budgeting. Which investment evaluation criteria would you use for unconventional cash flows and why? Provide a fictitious unconventional cash flow example and apply the payback period, NPV, IRR, MIRR, and PI methods to your example. Interpret the results. Kindly answer all the questions and sub-questions.
Question 1 Which one of the following statements is NOT correct? Group of answer choices If the initial cost of a project is increased, the net present value of that project will decrease. The MIRR is specifically designed to address conventional cash flows. If the internal rate of return equals the required return, the net present value will equal zero. Net present value is equal to the investment’s cash inflows discounted to today's dollars minus the initial cost of the investment. Net present value is negative when the required return exceeds the internal rate of return.