What are the shortcomings of the internal rate of return criterion?

Q: What does a failed net-investment test indicate?

A: Answer: Net investment test: The company will not overdraw at any stage on its return, and is thus…

Q: WHAT IS THE VALUE OF DISCOUNTED FLOWS

A: As per Time value of money, there are present values as well as future values.

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: Why is partitioning an internal rate of return important?

A: Introduction: There are two cash flow components which can form the portioning of internal rate of…

Q: What is the significance of the Value at Risk (VaR) method?

A: The question is based on the concept of Value at Risk (VaR). VaR is a statistical measure of risk in…

Q: a. what is the difference between the discount rate used for net present value and the internal rate…

A: Discount rate used for net present value is rate which investor want to earn from a project . It is…

Q: Which are the more complex applications of rate-of-return techniques/

A: The question is based on the concept of rate of return and its application in finance

Q: ected rate of return concept differ from that of the rea

A: There are many method of valuation of stock based on expected rate and realized return and dividends…

Q: Should the analyses show the sensitivity of the discounted net present value and other outcomes?

A: The question is based on the concept of a sensitivity analysis, used as a analysis tool in capital…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: Why do most of the engineers prefer Rate of Return Analysis to the PW method?

A: Answer: They would be calculating the present worth of cash flows using a net present value…

Q: What are the shortcomings of the payback period criterion? Which of these shortcomings are accounted…

A: Payback method is a manner of evaluating capital projects which computes the time taken by the cash…

Q: How is the payback period determined?

A:

Q: Describe the strengths and weakness of payback method.

A: Definition:   Payback method: Payback method refers to the method which measures the time period…

Q: Why do conflicts sometimes arise between the netpresent value (NPV) and internal rate of return(IRR)…

A: The basic assumption between NPV and IRR method is the cash flows are reinvested. In the NPV method,…

Q: What is the risk free return?

A: Rate of return is the return percentage which an investor gets from the money which has been…

Q: What are the considerations in imputing an appropriateinterest rate?

A:

Q: What is the difference between the possible returns and the expected return?

A:

Q: Does the IRR measure ignore the scale of investment?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: what is meant by the required rate of return

A: The return which is expected to be earned by investing in a security is known as Required Rate of…

Q: What makes the risk-adjusted discount rate approach appealing?

A: Answer: The approximation of the present cash value for high risk assets is called adjusted discount…

Q: What are the Differences in Maturities?

A: Maturities in the context of the bond mean that bonds are issued for a specific period of time. It…

Q: What discount rate is used in a lessor’s NPV analysis?

A: Weighted average cost of capital is used as discount rate in Lessor's NPV analysis.

Q: What is meant by partitioning the internal rate of return? Why is this procedure meaningful?

A: Internal rate of return is defined as the annual rate of earnings on an investment and unlike income…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: The difference between the expected return and the actual return is referred to as the unexpected…

A: The excess amount over invested value that an investor estimates to realize over horizon of…

Q: What is the difference between YTD and YoY return? Provide an example

A: In the question they have asked regarding YTD and YOY differences between them so they will be…

Q: What makes the risk-adjusted discount rate approach appealing in practical application?

A: Answer: The discount rate may be changed to offset the risk involved in a project in order to…

Q: What is the decision rule for payback?

A: Payback period is the period of time taken by the project to recover the investment in such project…

Q: What is internal rate of return (IRR) method?

A: NPV shows the excess of PV of all the cash inflows over the initial outlay of the project. It is a…

Q: What is the conventional-payback method?

A: Conventional Payback Method

Q: What are some criticisms of the payback method?

A: Payback Period: Payback period is the period in which the project recovers its initial cost of the…

Q: Present the internal rate of return criterion and its strengths and weaknesses.

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: The expectations gap is

A: The Answer :

Q: /hat is the exact rate of return?

A: MACHINE A         PV FACTOR PRESENTVALUE A 0 FIRST COST -8000   8000…

Q: What should be done to apply rate-of-return analysis correctly?

A: Rate of return: It can be defined as the rate of interest that has been earned by the company on the…

Q: What is hurdle rate?

A: Hurdle rate a rate usually used in capital budgeting decisions to calculate the acceptability of a…

Q: What are the shortcomings of the payback period?

A: Payback period: The payback period assesses the time period required to recover the initial…

Q: What are the weaknesses of the payback method?  What other options do you have?

A: Pay back period is period required to recover initial amount of investment.

Q: What is the relationship between risk and return?

A: Risk return relationship: The association among risk and return is recognized as the risk-return…

Q: Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?

A: Question is based on the concept of Business Finance

Q: have led to a drop in the required rate of return?

A: Required Rate of return is the minimum rate of return which an investor expects for investing in a…

Q: What are the weaknesses of the payback method?

A: Payback period is the amount of time required for firm to recover its initial investment in projects…