Answered: The AW of a project can be estimated by…

The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section11.1: Identifying Relevant Cash Flows

Problem 3ST

See similar textbooks

Related questions

Q: Breakeven cash inflow refers to ________. the minimum level of cash inflow necessary for a…

A: Net present value is one of the discounted techniques of capital budgeting which is used to measure…

Q: Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of…

A: IRR(Internal ROR) is the rate at which NPV(Net Present Value) of a project is zero. At IRR, PV of…

Q: A project is accepted if, Net present value of the project is positive. IRR is lower than cost of…

A: Net Present Value method is used to ascertain whether the proposal should be selected or rejected…

Q: What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV:…

A: Introduction: This question is related to the concept of capital budgeting. It is nothing but an…

Q: Under the indirect method of estimating project cash flows, an increase in trade creditors in a…

A: Cash flow statement is divided into three activities i.e. cash flow from operating activities, cash…

Q: What will be the effect of correcting for this error on the NPV and IRR figures?

A: IRR is actually the acronym of the internal rate of return which is the rate which is determined so…

Q: ve determined the profitability of a planned project by finding the present value of all the cash…

A: Present value of cash flow is related to the discount rate and the period of cash flow of the…

Q: The Modified Internal Rate of Return (MIRR) is based on : Reinvestment rate, financing rate, and the…

A: MIRR is a discounting rate that compares the present value of future cash inflows to zero year…

Q: f a project's cash flows are discounted at the internal rate of return, the NPV will always be…

A: Internal rate of return is the rate at which present value of cash inflows is equal to present value…

Q: Net working capital: A. can be ignored in project analysis because any expenditure is normally…

A: Introduction: Net working capital is nothing but the balance amount left after subtracting the total…

Q: Which one of the following statements is correct?

A: If the internal rate of return equals the required return, the net present value will equal zero.

Q: Which of the following statements is correct regarding the payback method? Takes account of…

A: Payback period is a tool of capital budgeting used to evaluate projects and investments.

Q: which of the following should not be included in the cash flows for project analysis?…

A: Meaning of the given options: Opportunity cost : It is the benefit foregone from not selecting the…

Q: Assume a project has normal cash flows (i.e. the initial cash flow is negative and all other cash…

A: Option B) - All else equal, a project's N.P.V increases as the cost of capital declines.

Q: Which of the following cash flows are not considered in the calculation of the annual cash-flow for…

A: Proceeds from selling an old asset which is being replaced by a new asset It does not impact the…

Q: Which of the following should NOT be included in the cash flows for project analysis? Opportunity…

A: Explanation of the given option: 1. opportunity cost : It is the cost to be borne for not choosing…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Statement A: FALSE Because project NPV is found by discounting the cash inflows at a discount rate…

Q: Which of the following statements is False regarding the payback period method: DA Use as a tool in…

A: Statement -D is false.As payback period method is Non- discounting cash flow criteria…

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: Which of the statements below is TRUE regarding capital budgeting? O A. Capital budgeting deals with…

Q: In computing the present value of an investment in equipment, the present value of the residual…

A: Net Present value = Present value of future cash flows + Present value of terminal cash flow -…

Q: Devril plc is considering the investment in a project that has an initial cash outlay fo by a series…

A: The cost of capital represents the minimum desired return whereas the net present value is the…

Q: 1) In IRR method the cash flows from a project are reinvested at the cost of capital. II) IRR is the…

A: Answer is A. III and I Explanation- I) In IRR method the cash flows from a project are reinvested…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: It refers to the rate of return that is computed by the company to make a decision of selection of a…

Q: Which of the following would cause a project to have a lower net present value, thereby making the…

A: Capital budgeting techniques include: Net Present Value Proﬁtability Index Internal Rate of Return…

Q: If an investment project has a negative net present value (NPV), which one of the following…

Q: To calculate net present value of a project with normal cash flows, find the present value of the…

A: To calculate net present value of a project with normal cash flows, find the present value of the…

Q: Which of the following statements Is false with respect to the simple rate of return? Multiple…

A: Formula: Simple rate of return = Average profits / Initial investment

Q: Concerning incremental project cash flow, this is a cost one would never count as a cash flow of the…

A: The increased operating cash flow that a company obtains as a result of taking on a new project is…

Q: In calculating Net Present Value (NPV), which one of the following is not an example of a relevant…

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

Q: Discuss the following statement. A manager believes that changes in NWC can be ignored from your…

A: Net working capital means difference between the current assets and current liabilities.

Q: If a low cash flow this year makes a low cash flow next year more likely to occur, this means the…

A: The question is related to the Cash flows pattern. Corrected means in which one thing affects or…

Q: The profitability index O will never be greater than 1. O does not take into account the discounted…

A: The profitability index helps to compare the project. It measure the attractiveness of the project.…

Q: In the payback method, depreciation is added back to net operating income when computing the annual…

A: The payback period alludes to the measure of time it takes to recoup the cost of an investment.…

Q: The ARR has one specific advantage not possessed by the payback period in that it a.considers the…

A: Definition:

Q: ssume a project has normal cash flows. All else equal, whic llowing statements is correct? A…

A: The pay back period is the amount of time required to recover the initial amount of investment and…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Point 1 is not correct as IRR is not found using this method. Cash flows cannot be compounded at…

Q: Changes in the net working capital: A. can affect the cash flows of a project every year of the…

A: Working capital is ensure that the firm is able to continue its operations and that it has…

Q: The number of years it takes to recapture a project`s initial outlay from the discounted free cash…

A: Capital budgeting has different techniques to evaluate a project to either accept it or reject it.…

Concept explainers

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.

Question

The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment? Select one: a. Return of investment b. Yield c. Rate of return d. Economic return
Which of the following statements is true about the internal rate of return? a. It is the interest rate that sets a project's net present value at zero. b. It is the minimal acceptable interest rate on an investment. c. It is the difference between the present value of the cash inflows and outflows associated with a project. d. It is the difference between the present value of a cash outflow and the depreciation associated with an asset.
To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.
A project's IRR: A) All of these answers are correct. B is the average rate of return necessary to pay back the project's capital providers. C is equal to the discounted cash flows divided by the number of cash flows if the cash flows are a perpetuity. D will change with the cost of capital.
This method solves for the interest rate that equates the equivalent worth of a project's cash outflows (expenditures) to the equivalent worth of cash inflows (receipts or savings). O A. Payback Period O B. Profitability Index O C. Rate of Return O D. MARR
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
Mathematically, we can determine the rate of return for a given project’s cash flow series by identifying an interest rate that equates the present worth of its cash flows to zero. Select one: True False and explain
The payback period is a non - discounted cash flow technique that measures: a. The time required to recover the initial investment b. The profitability of the project c. The net present value of the project d. The internal rate of return of the project
1. Which of the following is not true? Group of answer choices The method in which we calculate a project’s Internal Rate of Return (IRR) is called the Discounted Cash Flow approach. The Payback period can be calculated using the discounted (present) values of future cash inflows. The Payback period calculated using this method is what's called the Discounted Payback Period. The Net Present Value is calculated using the present value of the investments and future cash inflows. None of the above (all of the above are correct)
Which of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.
Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost. O If a project's IRR is smaller than the WACC, then its NPV will be positive. O A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting the TV to find the IRR.
The Modified Internal Rate of Return (MIRR) is based on: O a Reinvestment rate, financing rate, and the number of periods Only the reinvestment rate of the project's cash flows Neither of the aforementioned variables Only the financing rate of the project's cash flows