Answered: why net present value is considered to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Describe the principles of asset valuation. Distinguish between the required rate of return and expected rate of return. Based on the asset valuation, how do the investors make investment decisions using the required rate of return?
Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis? a. future value index b. price-level index c. rate of investment index d. present value index
Explain briefly what the terms working capital and working capital management imply. Explain the link between current asset policy and liquidity, profit, and risk as well as any other considerations. Which policy do you believe is the best?
Which of the following investment appraisal techniques does not involve discounting? a. NPV b. Discounted payback period c. ARR d. IRR
Describe some of the investment strategies?
What are the main constraints or obstacles to implementing the investment management concept?
Which of the following are the key factors when determining asset allocation for an investment? I. Time an investor has until he needs to use the money from the investment (time horizon) II. Risk preferences (tolerance for risk) III. Current financial situation a. I., II., & III. b. I. & III. c. II. & III. d. I. & II.
What is the relationship between return on capital investment and the risk associated with the anticipated sales of the product for which a new method will be used? Discuss.
Why are statistical approaches and tools important in investment decision-making?
Which of the following is a present value method of analyzing capital investment proposals? Oaverage rate of return O cash payback method O accounting rate of return net present value
Technically, the required return of an investment can be determined by determining the investments risk profile. However, many intangible factors influence an investor’s decision to invest. Discuss the intangible factors that may come into play in the investment decision process.
Define the term elements associated with investment activities?

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why net present value is considered to be superior to internal rate of return as an investment appraisal method? Critically evaluate and give an example if possible