Why does net working capital appear with both negative andpositive values?

Q: Explain how the cost of capital serves as a screening tool when using (a) the net present value…

A: Cost of capital:   Cost of capital is the required return necessary to make a capital budgeting…

Q: What is the basic idea of zero working capital, and how is workingcapital defined for this purpose?

A: Zero working capital is a condition in which the current assets of the company balance exactly with…

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: Why might the weights of capital be different depending on whether book values,market values, or…

A: The weights of the capital should be different for book values of a equity, market value of a…

Q: Do you agree? Why? (a) High levels of working capital decrease risk and decrease return. (b) High…

A: Working capital refers to the measure of the short-term financial health of the company that…

Q: What do you believe is the significance of a good capital structure? What is Degree of Operating…

A: Capital structure refers to company's debt and equity mix as a means  for financing the operation…

Q: Would the NPVs change if the cost of capitalchanged?

A: The NPV (Net Present Value) is entirely based on the value of the weighted average cost of capital…

Q: Why does a weighted average cost of capital suggest an optimal capital structure?

A:

Q: What does negative working capital mean?

A: Answer: Working capital is nothing but excess of total current assets over total current…

Q: Explain how the cost of capital serves as a screening tool when using the net present value method.

A: Definition: Net present value method: The net present value method is the method that is used to…

Q: 2. What is the difference between Gross Working Capital and Net Working Capital? Explain your answer…

A: Gross working capital is referred as the investment of the firm in the current assets. Current…

Q: How is can CAPM, Sharpe ratio, Treynor measures and Jensen’s Alpha be used to maintain positive…

A: The performance of portfolio or investment should not evaluated only using the return of portfolio…

Q: Which of the following statements is CORRECT? Profit have no effect on capital Profit will…

A: Profit means the difference between the revenue from operation and total cost . Capital means the…

Q: What is capital rationing, what conditions lead toit, and how should it be dealt with?

A: Capital budgeting is a process in which capital projects are assessed in terms of their viability…

Q: Why are market-based weights used instead of book-value-based weights when computing the weighted…

A: Market value is that present worth of the firm or any resource in the market on which it tends to be…

Q: How do we get the weighted average cost of capital if not given in the question?

A:

Q: In computing the cost of capital, do we use the historical costs of existing debt and equity or the…

A: WACC is cost incurred by entity to finance its capital structure. It is sum of weighted individual…

Q: In the case of the net present value technique, explain how the cost of capital is used as a…

A: The question tells about the net present value technique and  how the cost of capital is used as a…

Q: Can CCC be negative? If so, what does it indicate?

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: hat is the role of the WACC (weighted average cost of capital) in valuation? How will WACC (weighted…

A: Weighted Average Cost of Capital (WACC): The Weighted Average Cost of Capital (WACC) is the weighted…

Q: What is the crossover rate, and how does its value relative to the cost of capital determinewhether…

A: Crossover rate is a rate where net present values of two mutually exclusive projects are equal to…

Q: What information does the payback convey that is absent from the other capitalbudgeting decision…

A: Payback period method is a traditional method used in capital budgeting decisions which is used to…

Q: The cost of capital is a hurdle rate. Is this statement true? Why or why not?

A: The question is based on the concept of minimum required rate for any project . Hurdle rate is the…

Q: Why do we use the overall cost of capital for investment decisions even when only one source of…

A: The question is based on the concept of Financial planning.

Q: What exactly is negative working capital?

A: Working capital is the difference between a bank's assets (cash, accounts receivable/unpaid customer…

Q: What is the weighted average cost of capital?

A: The formula to compute weighted average cost of capital as follows:

Q: Does weighted average cost of capital is similar to Cost of Capital?

A: Cost of capital refers to the return expected by the company for making investments in projects or…

Q: a. What is STP's unlevered cost of capital? b. What is STP's after-tax debt cost of capital? c. What…

A: a) Total common stock value = 32 * 12 = 384 Total debt = 100 Total value = 384 + 100 = 484 Unlevered…

Q: What is the nominal return associated with an investment in capital, and why?

A: Nominal Return is the amount of money generated by an investment.

Q: Why is "Projecting Growth Beyond What the Capital Being Valued Will Support" considered a common…

A: Income Approach There are two different model which was incurred in the income approach.  The…

Q: Why can we not invest net income? Explain with an example?

A: The net income is the net profit of the company earned during the period. The net income includes…

Q: What does it mean to have negative working capital?

A: Working capital, also known as net working capital (NWC), is the difference between a company's…

Q: What is the crossover rate, and how does it interact with the costof capital to determine whether or…

A: The rate at which the net present value (NPV) of 2 ventures is equivalent is the crossover rate…

Q: The computation of total asset requirement is similar with judgmental approach' true or false Net…

A: The answers for true or false questions and relevant explanation are presented hereunder : What is…

Q: Why is the cost of capital sometimes referred to as a “hurdle rate”?

A: Cost of capital is the cost of financing a business, investment or a project. Cost of capital is…

Q: The user cost of capital does NOT depend on a. The real interest rate b. The unit price of capital…

A: The question is related to Cost of capital. The cost of capital is the minimum required rate of…

Q: What is the Return on Invested Capital?

A: Return on invested capital is calculated or determined to know the efficiency of the company on…

Q: What does working capital mean? What makes up working capital? How does management determine working…

A: The answer:

Q: purpose for capital analysis

A: Capital analysis is the study of capital structure of a business entity.

Q: Explain the concept of capitalization effects?

A: Capitalization means recording an expense or cost on the assets side of the balance sheet and…

Q: Define negative working capital. Is a negative working capital a sign of illiquidity or of…

A: Working capital is amount of temporary cash available for companies for timely payments of company…

Q: The rate of return, discount rate, hurdle rate, and opportunity cost of capital all have the same…

A: Rate of return is the minimum rate of return that an investor expects while investing in a project.…

Q: weighted average cost of capital

A: WACC stands for Weighted Average cost of capital refers to the cost of capital of the company which…

Q: When calculating WACC, what capital is excluded and why?

A: when the company has multiple sources of finance in the company, then it is required to calculate…

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.