When different investment rules give conflicting answers, then decisions should be based on the Net Present Value rule, as it is the most reliable and accurate decision rule True False
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- An investment should be rejected if the IRR is Group of answer choices - equal to the required rate of return - greater than the accounting rate of return - less than the required rate of return - greater than the required rate of returnIn choosing where to invest, return and risk for an investment must be compared. It is not sufficient to choose an investment based only on return without taking risk into consideration. There are two methods or measures that compare return and risk. State these two methods, the formula for each and the criteria used in evaluating alternative investment of each method.Critically evaluate the sunk cost fallacy influencing investment decision-making
- Critically evaluate the Regret aversion influencing investment decision-making Critically evaluate the availability bias influencing investment decision-makingOne of the easiest method of differentiating Alternative Investments from the Traditional Investment is by stating what it is not, critically evaluate this statement.The decision tree below describes a “sure thing” investment and a “risky” investment. Use backward induction to evaluate which is the better investment. Assume all values are already given in present value terms.
- Which of the following statements is true regarding the sensitivity analysis approach to investment appraisal? a. It involves changing many factors at the same time b. It provides an indication of the likelihood of changes in the key factors c. It provides managers with clear guidance concerning the investment decision d. It is commonly called ‘how-now’ analysis e. Noneoftheabovearetrueinvestment decisions does not have to be taken during various pre-investment stages. is it True or False?For researchers to consider an investment strategy to have delivered abnormal returns, it must have exceeded the return on its benchmark plus: the return on the risk-free asset. transaction costs and the highest marginal income tax rate. transaction costs and information acquisition costs. All of the above answers are correct. None of the above answers are correct.
- Match each of the following terms with the best definition. A. Theory of constraints B. Sunk cost C. Differential analysis D. Opportunity cost - Strategy that focuses on reducing bottlenecks. - Revenue forgone from an alternative use of an asset. - Not relevant to future decisions. - Evaluation of how income will change based on an alternative course of action.__________ considers the impact of changing one or more inputs or assumptions on the resulting answer (output) of an analysis. a.Sensitivity analysis b.Capital rationing c.Expected value analysis d.The net present value methodWhich of the following is a disadvantage of the internal rate of return criterion? Select one: a. It is not a true rate of return. b. It uses an arbitrary benchmark cutoff rate. c. It ignores time value of money, cash flows, and market values. d. It cannot be used to rank independent projects. e. It may lead to incorrect decisions when comparing mutually exclusive investments.