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: If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues…
A: A project consists of fixed as well as variable costs. Fixed costs remain fixed all the time,…
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: What is the typical discount rate used with the Net Present Value (NPV) when project risk is the…
A: a) The rate of return the shareholders expected to get, or the rate at which the company borrows,…
Q: What are the three potential flaws with the regular payback method? Does the discounted payback…
A: Payback period: Payback period is number of years required to recover the initial investment in…
Q: If a project with conventional cash flows has an IRR equal to the required return, then: O The…
A: IRR is the actual rate of return earned on the project while the required return is the discount…
Q: Assume a project has normal cash flows. All else equal, which of the following statements is…
A: The correct answer is option (e). The weighted average cost of capital includes the cost of…
Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…
A: WACC is the required rate of return, where as IRR is the actual rate of return of the project. NPV…
Q: Which of the following statements is false? (You may select more than one answer.)a. The payback…
A: Cash payback method: Cash payback period is the expected time period which is required to recover…
Q: Explain how inflation impacts capital budgeting analysis. Why do we care? How is NPV impacted if…
A: Nominal rate and inflation rate are related to each other through real rate as shown below. Nominal…
Q: Which capital budgeting projects are ?preferred اخترأحد الخیارات a. Higher payback period O b. None…
A: Various decisions are required to be taken by the management before making any decisions related to…
Q: If a net present value analysis for a normal project gives an NPV greater than zero, an internal…
A: NPV greater than 0
Q: Why the payback method is often considered inferior to discounted cash flow in capital investment…
A: Payback period is capital budgeting technique which tells how much time will it take for Ann…
Q: What do you know about the mathematical value of the internal rate of return of a project under each…
A: Internal rate of return(IRR) is rate at which net present value(NPV) of project is equal to zero or…
Q: You have determined the profitability of a planned project by finding the present value of all the…
A: We determine the profitability of project by discounting the future cash flows with appropriate…
Q: True or False A project will have multiple internal rates of return if its future net cash flows…
A: Internal rate of return (IRR) is the annual rate of return which is anticipated from the cash flows.…
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: Question 1 Which one of the following statements is NOT correct? Group of answer choices If…
A: Capital budgeting is a technique to estimate the profitability of the projects. There are various…
Q: Assume a project has normal cash flows. All else equal, which of the following statements is…
A: NPV is the net present value of a project that is determined by deducting the initial investment…
Q: return
A: MIRR or the modified internal rate of return assumes that the company's cash flows can be reinvested…
Q: Which of the following statements is CORRECT? O Projects with "normal" cash flows can have two or…
A:
Q: A project's present value can be decreased by, I. decreasing the required discount rate (required…
A: There are various reasons for decreasing the present value of the project some of them are as…
Q: Whenever the present value of the project is greater than the initial cash outlay then both the NPV…
A: Net present value is present value of cash inflows less present value of outflows. PI i.e.…
Q: Which of the following is not a capital budgeting technique? Select one: a. Net present value b.…
A: Capital budgeting: Capital budgeting is the technique used for analyzing the investment in long term…
Q: internal rate of return (IRR): Group of answer choices will always lead to the same decision as…
A: IRR is a method used for investment appraisal. It is the rate of return at which the present value…
Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…
A: a) If NPV is positive, Then IRR > WAC If NPV is negative, Then IRR < WACC So, the correct…
Q: tively rapidly will be more sensitive to changes in the discount rate than the NPV of a project…
A: Net present value is the difference between the present value of cash flow and initial investment.
Q: Consider a project with the following cash-flows: ime Cash-flow t=1 t=2 t=3 3 t=0 -10 2 What is the…
A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…
Q: Which of the following is correct?
A: The payback period is the time duration taken to reap back the amount invested in the project. The…
Q: calculates that a project with conventional cash flows and a required return of 14% has a negative…
A: Internal rate of return when net present value is zero that means present value of cash flow is…
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 a firm has only independent projects, a constant WACC, and projects with normal cash flows, the…
A: This declaration is valid because of the reasons why it is possible to approve or deny individual…
Q: Which of the following statements is CORRECT?
A: Net Present Value (NPV) Net Present Value method is a discounting cash flow technique used in…
Q: Which of the following statements related to the internal rate of return (IRR) are correct? I. The…
A: All Four options are correct.
Q: Which of the following statements is most correct? If a project’s internal rate of return (IRR)…
A: IRR or Internal Rate or Return is discount rate that discounts Net Present Value(NPV) of any…
Q: When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O…
A: Free cash flow refers to funds of the company which is freely available to be repaid to the…
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: A project's internal rate of return (IRR) is the that forces the PV of its inflows to equal its…
A: Since you have asked a question with multiple parts, we will only solve the first 3 parts for you.…
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…
If a project's cash flows are discounted at the
T/F
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- The internal rate of return (IRR): Group of answer choices will always lead to the same decision as will NPV. is a "purer" discount rate because is excludes all external project cash flows. is the discount rate that produces NPV of zero for a series of cash flows. None of the aboveWhen using the NPV method for a particular investment decision, if the present value of all cash Inflows Is greater than the present value of all cash outflows, then _______ . A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowTrue or False A project will have multiple internal rates of return if its future net cash flows alternate between negative and positive values.
- When the present value of the cash inflows exceeds the initial cost of a project, then the project should be : A. rejected because NPV is negative. B. accepted because NPV is greater than 1. C. accepted because the profitability index is negative. D. rejected because the internal rate of return is negative.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 explainIf the sum of the incremental cash flows is negative, what is known about the rate of return on the incremental investment?
- A project's internal rate of return (IRR) is the that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the on a bond. The equation for calculating the IRR is: CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must be a change in cash flow signs to calculate the IRR. The IRR equation is simply the NPV equation solved for the particular discount rate that causes NPV to equal . The IRR calculation assumes that cash flows are reinvested at the . If the IRR is than the project's risk-adjusted cost of capital, then the project should be accepted; however, if the IRR is less than the project's risk-adjusted cost of capital, then the project should be . Because of the IRR reinvestment rate assumption, when projects are evaluated the IRR approach can lead to conflicting results from the NPV method. Two basic conditions can lead to conflicts between NPV and…When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O increases stays the same decreasesWhich 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.
- Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? A. A project's IRR increases as the WACC declines. B. A project's MIRR is unaffected by changes in the WACC. C. A project's regular payback increases as the WACC declines. D. A project's discounted payback increases as the WACC declines. E. A project's NPV increases as the WACC declines.What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV: WACC B.IRR: The IRR itself NPV: WACC C.The cash flows generated by the project are not assumed to be reinvested. So they will not earn a rate of return. D.IRR: Risk free rate NPV: Risk free Rate E. IRR:WACC NPV: WACCWhich 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.