
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- The method that measures a projects return based on
present values is the:Internal Rate of Return - Discounted Payback Period
- Modified Internal Rate of Return
- None of the Above
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- Explain the uses, limitations and merits of the Payback Period compared to Net Present Value in investment appraisal.arrow_forwardTo calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.arrow_forwardFor a capital investment project to be acceptable, it must generate a rate of return A) Less than the required rate of returnB) Equal to or greater than the cost of capitalC) equal to the initial investmentD) none of the abovearrow_forward
- Define each of the following terms:b. Incremental cash flow; sunk cost; opportunity cost; externality; cannibalization; expansion project; replacement projectarrow_forwardWhat is the Modified Internal Rate of Return (MIRR) Select one: The opposite of NPV A reinvestment rate to account for positive cash flows reinvested into a project An approach to discounting The finance rate of a projectarrow_forwardPLEASE ANSWER ASAP.....arrow_forward
- The average accounting rate of return (AAR): Select one: A. is the best method of financially analysing mutually exclusive projects. B. is similar to the return on assets ratio. C. measures net income as a percentage of the sales generated by a project. D. considers the time value of money. E. is the primary methodology used in analyzing independent projects.arrow_forwardWhich provides a better estimate of a project’s “true” rate of return, the MIRR or theregular IRR? Explain.arrow_forwardWhich of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.arrow_forward
- How can we develop the cash flow series over the project life based on the assumption of most likely estimates?arrow_forwardWhen evaluating a project with non-normal cash flows (cash flows change sign for at least two times during the project life), the best method to use for capital budgeting analysis is the: internal rate of return payback rule discounted payback Modified internal rate of return (MIRR)arrow_forwardWhat is the 'golden rule' for finding the Internal Rate of Return (IRR) of an investment project cash flow? a)Vary the discount rate until the net present value of the cash flow equals zero. b)Vary the discount rate until the net present value of the cash flow is positive c)Vary the discount rate to the point of maximum increase in the net present value d)Vary the discount rate until the net present value of the cash is negativearrow_forward
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