Answered: The AW of a project can be estimated by…

The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 4MC

See similar textbooks

Related questions

Q: Breakeven cash inflow refers to ________. the minimum level of cash inflow necessary for a…

A: Net present value is one of the discounted techniques of capital budgeting which is used to measure…

Q: Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of…

A: IRR(Internal ROR) is the rate at which NPV(Net Present Value) of a project is zero. At IRR, PV of…

Q: A project is accepted if, Net present value of the project is positive. IRR is lower than cost of…

A: Net Present Value method is used to ascertain whether the proposal should be selected or rejected…

Q: What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV:…

A: Introduction: This question is related to the concept of capital budgeting. It is nothing but an…

Q: Under the indirect method of estimating project cash flows, an increase in trade creditors in a…

A: Cash flow statement is divided into three activities i.e. cash flow from operating activities, cash…

Q: What will be the effect of correcting for this error on the NPV and IRR figures?

A: IRR is actually the acronym of the internal rate of return which is the rate which is determined so…

Q: ve determined the profitability of a planned project by finding the present value of all the cash…

A: Present value of cash flow is related to the discount rate and the period of cash flow of the…

Q: The Modified Internal Rate of Return (MIRR) is based on : Reinvestment rate, financing rate, and the…

A: MIRR is a discounting rate that compares the present value of future cash inflows to zero year…

Q: f a project's cash flows are discounted at the internal rate of return, the NPV will always be…

A: Internal rate of return is the rate at which present value of cash inflows is equal to present value…

Q: Net working capital: A. can be ignored in project analysis because any expenditure is normally…

A: Introduction: Net working capital is nothing but the balance amount left after subtracting the total…

Q: Which one of the following statements is correct?

A: If the internal rate of return equals the required return, the net present value will equal zero.

Q: Which of the following statements is correct regarding the payback method? Takes account of…

A: Payback period is a tool of capital budgeting used to evaluate projects and investments.

Q: which of the following should not be included in the cash flows for project analysis?…

A: Meaning of the given options: Opportunity cost : It is the benefit foregone from not selecting the…

Q: Assume a project has normal cash flows (i.e. the initial cash flow is negative and all other cash…

A: Option B) - All else equal, a project's N.P.V increases as the cost of capital declines.

Q: Which of the following cash flows are not considered in the calculation of the annual cash-flow for…

A: Proceeds from selling an old asset which is being replaced by a new asset It does not impact the…

Q: Which of the following should NOT be included in the cash flows for project analysis? Opportunity…

A: Explanation of the given option: 1. opportunity cost : It is the cost to be borne for not choosing…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Statement A: FALSE Because project NPV is found by discounting the cash inflows at a discount rate…

Q: Which of the following statements is False regarding the payback period method: DA Use as a tool in…

A: Statement -D is false.As payback period method is Non- discounting cash flow criteria…

Q: Which of the following statements indicate a disadvantage of using the discounted payback period for…

A: Discounted payback period is the procedure of capital budgeting which is used to evaluate the…

Q: Which of the statements below is TRUE regarding capital budgeting? O A. Capital budgeting deals with…

Q: In computing the present value of an investment in equipment, the present value of the residual…

A: Net Present value = Present value of future cash flows + Present value of terminal cash flow -…

Q: Devril plc is considering the investment in a project that has an initial cash outlay fo by a series…

A: The cost of capital represents the minimum desired return whereas the net present value is the…

Q: 1) In IRR method the cash flows from a project are reinvested at the cost of capital. II) IRR is the…

A: Answer is A. III and I Explanation- I) In IRR method the cash flows from a project are reinvested…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: It refers to the rate of return that is computed by the company to make a decision of selection of a…

Q: Which of the following would cause a project to have a lower net present value, thereby making the…

A: Capital budgeting techniques include: Net Present Value Proﬁtability Index Internal Rate of Return…

Q: If an investment project has a negative net present value (NPV), which one of the following…

Q: To calculate net present value of a project with normal cash flows, find the present value of the…

A: To calculate net present value of a project with normal cash flows, find the present value of the…

Q: Which of the following statements Is false with respect to the simple rate of return? Multiple…

A: Formula: Simple rate of return = Average profits / Initial investment

Q: Concerning incremental project cash flow, this is a cost one would never count as a cash flow of the…

A: The increased operating cash flow that a company obtains as a result of taking on a new project is…

Q: In calculating Net Present Value (NPV), which one of the following is not an example of a relevant…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Discuss the following statement. A manager believes that changes in NWC can be ignored from your…

A: Net working capital means difference between the current assets and current liabilities.

Q: If a low cash flow this year makes a low cash flow next year more likely to occur, this means the…

A: The question is related to the Cash flows pattern. Corrected means in which one thing affects or…

Q: The profitability index O will never be greater than 1. O does not take into account the discounted…

A: The profitability index helps to compare the project. It measure the attractiveness of the project.…

Q: In the payback method, depreciation is added back to net operating income when computing the annual…

A: The payback period alludes to the measure of time it takes to recoup the cost of an investment.…

Q: The ARR has one specific advantage not possessed by the payback period in that it a.considers the…

A: Definition:

Q: ssume a project has normal cash flows. All else equal, whic llowing statements is correct? A…

A: The pay back period is the amount of time required to recover the initial amount of investment and…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Point 1 is not correct as IRR is not found using this method. Cash flows cannot be compounded at…

Q: Changes in the net working capital: A. can affect the cash flows of a project every year of the…

A: Working capital is ensure that the firm is able to continue its operations and that it has…

Q: The number of years it takes to recapture a project`s initial outlay from the discounted free cash…

A: Capital budgeting has different techniques to evaluate a project to either accept it or reject it.…

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

The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False

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

Similar questions

Calculate the cash flows for each year. Based on these cash flows and the average project cost of capital, what are the projects NPV, IRR, MIRR, PI, payback, and discounted payback? Do these indicators suggest that the project should be undertaken?
Calculate the project cash flows for each year. Based on these cash flows and the average project cost of capital, what are the projects NPV, IRR, MIRR, PI, payback, and discounted payback? Do these indicators suggest that the project should be undertaken?
The expected period of time that will elapse between the date of a capital investment and thecomplete recovery of the amount of cash investedis called: A.The average rate of return period B.The cash payback period C.The net present value period D.The internal rate of return period
The NPV method assumes that cash inflows associated with a particular investment occur when? A. only at the time of the initial Investment B. only at the end of the year C. only at the beginning of the year D. at any of these times
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
Define each of the following terms: Capital budgeting; payback period; discounted payback period Independent projects; mutually exclusive projects Net present value (NPV) method; internal rate of return (IRR) method; profitability index (PI) Modified internal rate of return (MIRR) method NPV profile; crossover rate Nonnormal cash flow projects; normal cash flow projects; multiple IRRs Reinvestment rate assumption Replacement chain; economic life; capital rationing; equivalent annual annuity (EAA)