What is the main disadvantage of discountedpayback? Is the payback method of any realusefulness in capital budgeting decisions?

Q: The IRR method and NPV method can differ in ranking of capital budgeting decisions. What causes…

A: The NPV is the difference between the present value of the cash inflow and the initial investment…

Q: Which of the following statements regarding capital budgeting analysis is correct?     NPV assumes…

A: Capital budgeting is the process of making investment decisions by a company in which different…

Q: Help question 20

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Q: “Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.

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Q: Why do come companies prefer to use discounting in their capital investment decisions?  What is a…

A: Capital Investment:-It is an investment that a company made to purchase its fixed assets or…

Q: Explain how inflation impacts capital budgeting analysis.  Why do we care? How is NPV impacted if…

A: Nominal rate and inflation rate are related to each other through real rate as shown below. Nominal…

Q: Why is the capital budgeting decision important?

A: Capital Budgeting relates to decision of entity relating to either purchase of capital assets or…

Q: Option values are extinguished when they areexercised. How does this influence capital budgeting…

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

Q: How is capital budgeting similar to security valuation? How is it different?

A: Capital budgeting is the process of evaluating various projects' net present value to arrive at a…

Q: Which of the following is not a method for incorporating risk analysis into capital budgeting?   a.…

A: Capital budgeting is a process of evaluating various investment proposals. The various capital…

Q: “Only quantitative outcomes are relevant in capital budgeting analyses.” Do you agree? E xplain.

A: “Only quantitative outcomes are relevant in capital budgeting analyses”. This statement is…

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: What is the Decision-making Criteria in Capital Budgeting?

A: Hi, there, Thanks for posting the question. As per our Q&A honor code, we must answer the first…

Q: Critically think and outline the difficulties that might come up in actual applications of the…

A: The following are the difficulties of capital budgeting: Forecasting the cash flow The time horizon…

Q: Why are discounted cash flow methods of making capital budgeting decisions superior to allother…

A: Discounted cash flow: it is a valuation method. This method helps in determining the Value of a…

Q: Under what circumstances the cross over rate will be an important point in capital budgeting. Can it…

A: Capital Budgeting is a process in which the company decided on the project investments which would…

Q: Risk in capital budgeting implies that the decision maker knows _ of the cash flows. Fill in the…

A: In capital budgeting the decision maker will have an idea after analysing risks about the cash flows…

Q: The goal of the capital budgeting decisions is to select capital projects that will decrease the…

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

Q: What factors can lead to an increasing marginal cost of capital?How might this affect capital…

A: Following are the factors that lead to an increasing marginal cost of capital: The breakpoint of…

Q: Payback period is one of the nondiscounting models used in capital investment decisions.  What are…

A: Payback period refers to the period in which the initial investment is recovered.

Q: What are the principal objections to the use of the average rate of return method in evaluating…

A: Average rate of return: Under this method, the average net income is used in evaluating the capital…

Q: Most capital budgeting techniques involve analysis of net operating profits. True or False

A: Capital Budgeting is the process by which a business makes investment decision in long term assets.…

Q: The Payback Method in capital budgeting ignores:  a The expected future cash flows of the firm.  b…

A: In capital budgeting, the payback period is the period of time required for the return on an…

Q: In capital budgeting, one advantage of the internal rate of return is that it does not require the…

A: Introduction: Capital budgeting: Capital budgeting is the technique used for analyzing the…

Q: Do you think capital budgeting is important? Justify

A: Capital budgeting is a process of investing into capital expenditure. Capital expenditure is an…

Q: Why might DCF techniques not lead to proper capital budgeting decisions?

A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…

Q: WHAT ARE THE PROBLEMS WITH IRR APPROACH TO CAPITAL BUDGETING?

A: IRR internal rate of return is very common method of capital budgeting decisions making.

Q: Which of the following is not a reason for risk and uncertainty in capital budgeting? a. Decisions…

A: Capital Budgeting decision are based on various factors

Q: What risks do common stockholders take that other suppliers of long term capital do not? Discuss the…

A: Common stockholders are the real owner of a company because these are the people who invest in the…

Q: In capital budgeting, the Payback Method suffers from the problem of: No consideration to sunk costs…

A: Traditional methods: Payback period: This method is used to calculate how many years a project will…

Q: Why is the NPV the primary capital budgeting decision criterion?

A: NPV( net present value) is a method to determine the current value of all the cash flows which are…

Q: What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing…

A: Answer: Option c.  Payback rule   Explanation: Payback rule is a very simple method which is used to…

Q: What is the major criticism of the payback and simple rate of return methods of making capital…

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: Payback is considered an unsophisticated capital budgeting technique because it a) gives explicit…

A: Capital budgeting is the method through which corporations make decisions of the acceptance and…

Q: What are the three types of risk that are relevant in capital budgeting?

A: Capital budgeting (or investment appraisal) is the planning process used to determine whether an…

Q: The following are discounting techniques in capital budgeting, except?     discounted payback…

A: Solution:- Definition:- Capital budgeting is useful for making investment decisions in long term…

Q: What is capital budgeting? What are the techniques of capital budgeting?

A: Capital budgeting Capital budgeting involves taking decisions related to investments in long-term…

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.