What are the principal objections to the use of the average rate of return method in evaluating capital investment proposals?

Q: What is the Capital Asset Pricing Model (CAPM)?What are the assumptions that underlie themodel?

A: The CAPM is an equilibrium model which stipulates the association among required rates of return and…

Q: Should the economic engineers make capital-expenditure decisions based on a prediction about the…

A: The question is based on the concept of capital expenditure decision making, which is investment of…

Q: Apply the procedure to find the true IRR, or return on invested capital, of the mixed investment?

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

Q: What distinguishes a capital investment from other investments?

A: Investments: It is the method by which an investor increases his value over some time for future…

Q: What's the difference between the capital asset pricing model and modified capital assset pricing…

A: Capital Asset Pricing Model CAPM describes the relationship between systematic risk and expected…

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: What is the weighted average cost of capital (WACC) and its significance?

A: Weighted average cost of capital (WACC): When a firm's weighted average cost of capital (WACC) is…

Q: One of the following methods are not a method to evaluate projects: Return on investment Discounted…

A: Capital budgeting: It implies to the process of evaluating different projects based on their…

Q: What are the reasons for using the private rate of return as thethe opportunity cost of capital for…

A: Opportunity cost of capital is the rate which an investor foregoes due to the investment in other…

Q: what is the benetifs of the accountants involvement in the capital investment decision?

A: In capital investment decision it is advisable to involve accountant. Following are the benefits for…

Q: the Capital Asset Pricing M

A: Explanation : In simple words, Capital asset pricing model for valuing the cost of capital contains…

Q: why net present value is considered to be superior to internal rate of return as an investment…

A: Investment- The purchase of an asset in order to generate income or capital gain is referred to as…

Q: What are the main criticisms of the Capital Asset Pricing Model (CAPM)? What does the empirical…

A: Capital Asset Pricing Model is a financial theory stating the linear relationship between required…

Q: Explain how a net present value (NPV) profile is used to compare capital projects. How does this…

A: The net present value is the sum of the present value of all the cash flows in the future subtracted…

Q: Which of the following are two methods of analyzing capital investment proposals that both ignore…

A: Which of the following methods of evaluating capital investment proposals? Following four methods…

Q: Describe the affects of the present value of an investment.

A: Present value of the investment: Present value of the investment is calculated using the cash flows…

Q: Is it ever appropriate or acceptable to use the payback method of evaluating capital investment…

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

Q: Why are rates of return superior to dollar returns when comparingdifferent potential investments?

A: A rate of return (ROR) refers to the net income or loss of an investment over a given timeframe as a…

Q: why is a risk analysis important to the capital investment decision making process?

A: Risk is the uncertainty or possibility of loss due to the decision in investment process. Of all the…

Q: Capital investment decisions are not affected by:

A: We will answer the first question since the exact one was not specified. Please submit a new…

Q: ith the use of an example, briefly explain the main difference between the ex-ante and the ex-post…

A: Main Difference between ex-ante and the ex-post opportunity cost of capital: Ex-post risk is…

Q: When and under what conditions the cross over rate will be used will be an essential consideration…

A: Introduction: The process through which the corporation decides on the project investments that will…

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: Explain the difficulties for determining the cost of capital in the short term decision making.

A: Introduction: Capital structure relates to financing of the overall activities and development of a…

Q: How does the capital asset pricing model (CAPM) influence financial decisions regarding risk and…

A: CAPM is related to the connection between the securities and their expected returns. CAPM is…

Q: asset

A: The term CAPM or capitam asset pricing model is a model which shows the relationship between risk…

Q: What is the capital asset pricing model (CAPM)? What are the assumptions that underlie the model?

A: Capital Asset Pricing Model is the most common security pricing model used in Finance. It is…

Q: What is the Capital Asset Pricing Model and explain the variables used to calculate the required…

A: The Capital asset pricing model is a model that is used for the calculation of the cost of equity of…

Q: Why should both quantitative and qualitative factors be considered in capital investment decisions?

A: The Investment commitment on any project is based on many factors which are classified as…

Q: Why is the compressed adjusted present value approachappropriate for situations with a changing…

A: Compresses Adjusted Present Value shows Net Present Value(NPV) of a project after considering the…

Q: How do we use the computed figure when evaluating an investment alternative?

A: There are various computations available for evaluation of investment alternatives.  The rate of…

Q: What is meant by an investment project’s internal rate of return? How is the internal rate of return…

A:

Q: What is the payback method of analyzing capital investments?

A: Formula: Payback period = Initial Investment / annual cash inflows

Q: Describe the concept of rate of return based on the return on invested capital in terms of a…

A: The term ROIC is used to calculate the profitability or return on invested capital that a business…

Q: how is the capital asset pricing model how is the model used in practice? please give some…

A: In finance we often use the Capital Asset Pricing Model (CAPM). This model essentially outlines the…

Q: Explain Yields on Investment Annuities?

A: The question is based on the concept of calculation yield, which describes the  returns to the…

Q: Discuss two limitations of using the weighted average cost of capital when making investment…

A: The corporation's cost of capital, calculated using both debt and equity, is known as the Weighted…

Q: Why would an investor prefer the payback period to other methods of capital investment appraisal

A: The investor prefers the payback period to other methods of capital investment appraisal because in…

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.