What is crossover rate and why is it important when evaluating two projects?

Q: Write the two common types of expansion decision problems in investment?

A: The two most common types of expansion decision problems in investment are: 1. Capital budgeting and…

Q: How would you compare two different projects using the net present value method?

A: Net Present Value: It is the present worth of the project's initial cost and the cash flows.  Hence…

Q: c) d) Which project(s) would you select if you used the IRR methods. Why? If these were mutually…

A: Answer C: Project B should be selected as it has a higher IRR.

Q: Summarizes the IRR computation for a mixed investment?

A: IRR for Mixed investmentBalances of project cash flow are both positive as well as negative. The…

Q: Which of the following best explains the limitations of usin discount rate for evaluating projects?

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

Q: True or False If several independent projects are considered, the one(s) with the highest PIs…

A: If several independent projects are considered, the one(s) with the highest PIs should be chosen...…

Q: Why would the average rate of return differ from the internal rate of return on the same project

A:

Q: Describe the Sensitivity Analysis for Mutually Exclusive Alternatives?

A: Sensitivity analysis portrays how various values of an independent factor under a given arrangement…

Q: two mutually exclusive projects were being compared, would a high cost of capital favor the…

A: Step -2 in the answer

Q: Describe the incremental Analysis for Comparing Mutually Exclusive Alternatives?

A: The question is based on the concept of Incremental cash flow analysis of mutually exclusive…

Q: What is required // calculate the required rate of return with an opinion on acceptance or rejection…

A: Rate of return is the return is the return received from an investment. It is the real return…

Q: The overall rate of return needs to be checked for multiple mutually exclusive projects when only…

A: When decision has to be made while comparing one project with other projects and out of which only…

Q: How can we observe four important investment characteristics of the project?

A: There are four features of investment: The asset that was bought. The cash flow generated by the…

Q: Explain in details the differences between the two typical analyses - Sensitivyty Analysis and…

A: Both Methods, Sensitivity Analysis and Scenario Analysis help in decision making.

Q: When faced with a set of independent projects, one should select (choose the best answer) A. all…

A: The net present value (NPV) approach calculates the current worth of all future cash flows generated…

Q: How will you choose between two mutually exclusive projects which do differs in terms of their…

A: An investment appraisal is a capital budgeting technique that helps to analyze a proposed project's…

Q: In dealing with IRR and NPV project evaluations, there is something called a crossover rate. What is…

A: The question is related to crossover rate of return i.e cost of capital at which the Net Present…

Q: Under what circumstances will you prefer profitability index to NPV as project evaluation…

A: Capital budgeting analysis is useful to know which projects are profitable and which are not. There…

Q: What are some differences in the analysis for a replacement project versus that for a new expansion…

A: Capital budgeting is a process of evaluating a potential investment. Various factors such as initial…

Q: a. Calculate the expected NPV for both projects. Can the question be resolved with this information…

A: Expected NPV: It is the weighted average of all NPVs. It is resulted when the weighted values are…

Q: When faced with a set of independent projects, one should select (choose the best answer) a. all…

A: The net present value (NPV) approach calculates the current worth of all future cash flows generated…

Q: Explain why NPV is generally preferred over IRR when choosing among competing or mutually exclusive…

A: When using the net present value method of selecting from various investment projects: the cash…

Q: If three investment alternatives all have some degree of risk and different expected returns, which…

A: If three investment alternatives all have some degree of risk and different expected returns. The…

Q: Describe the Replacement Analysis using the Opportunity-Cost Approach?

A: The company always considers the replacement projects when the old machinery or plant in the project…

Q: Do NPV and IRR always yield the same conclusion (accept or reject a project)? If not, when do they…

A: Net Present Value is the difference between present value of cash inflows and present value of cash…

Q: Do you think that the Balanced Scorecard approach can be employed to evaluate the performance of…

A: Yes, the Balanced Scorecard approach can be employed to evaluate the performance of Bell Division.…

Q: What is the biggest advantage of using RI to evaluate investment centers?

A: The evaluation of investment centers based on whether the minimum rate of return of the company is…

Q: Explain the difference between independent and mutually exclusive projects?

A: Under capital budgeting, there are 2 types of projects selection basis: 1. When projects are…

Q: Which project below would you consider acceptable? One whose IRR is greater than the MARR One whose…

A: Solution: Internal Rate of Return (IRR) is the rate of return which the project yields ie. the…

Q: a) Calculate the Internal Rate of Return (IRR), Profitability Index (PI) and Payback period for both…

A: The calculation for Option 1 using excel:

Q: What type of projects does the Payback method favor?

A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…

Q: Describe the evaluation techniques to consider multiple projects that are mutually exclusive?

A: Following are the evaluation techniques to consider multiple projects that are mutually exclusive:…

Q: The crossover rate is 13.5252%. Explain what this rate is and how it affects the choice between…

A: In the context of capital budgeting decisions, mutually exclusive projects means the list of…

Q: Consider IRR for a Nonsimple Project: Mixed Investment?

A: Answer: Mixed investment is an investment during the investment period in which a company borrows…

Q: If diversity is required, would you choose high correlation investments?

A: This question explains about the high correlation investments

Q: Can the IRR measure also be used to compare projects with unequal lives as long as we can establish…

A: Yes, the IRR measure can also be used when the project has unequal lives but a common study period…

Q: When faced with a set of independent projects, one should select (choose the best answer) all…

A: Positive NPV occurs only when the present value of all inflows is greater than the present value of…

Q: Is the financial breakeven point of a project the same as the crossover rate?

A: Crossover rate Crossover Rate is the weighted average cost of capital at which the Net present…

Q: Why do we need to use the incremental analysis when comparing mutually exclusive projects?

A: Mutually exclusive projects are the projects which compete with each other. In a company which has…

Q: Which of the following were listed as potential Problems or Issues associated with Using a Rate of…

A: Correct issues of ROR Approach- (2, 3, and 5)

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.