he relationship between the payback method and the internal rate of return is that: Group of answer choices The discounted payback period is exactly the same as the IRR. The payback period is the present value factor for the IRR. A payback period of less than one-half of the life of a project will yield an IRR lower than the target rate. A project whose payback period does not meet the c

he relationship between the payback method and the internal rate of return is that: Group of answer choices The discounted payback period is exactly the same as the IRR. The payback period is the present value factor for the IRR. A payback period of less than one-half of the life of a project will yield an IRR lower than the target rate. A project whose payback period does not meet the c

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EB: Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two...

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Which of the following statements is true? Multiple Cholce There Is no correlation between net present value and Internal rate of return. A project with a positive net present value will have a discount rate that Is greater than the Internal rate of return. None of the statements are true Glven several projects with positive net present values, the company should choose the project with the hlghest net present value. A project with a positive net present value will have a discount rate that Is less than the Internal rate of return.
What will happen to the internal rate of return (IRR) of a project if the discount rate is decreased from 8% to 6%? Select one: a. We cannot determine the direction of the effect on IRR from the information provided. b. The change in discount rate will not affect IRR. c. IRR will always increase. d. IRR will always decrease.
You should accept a project when the ?: net present value is negative. profitability index is positive. payback period exceeds the required period. AAR is greater than the required return. 7. Which one of the following statements is correct? The payback period is also referred to as the benefit-cost ratio. The internal rate of return can be reliably used for all independent projects. The profitability index is used when the investment funds are limited. The net present value should not be used to rank mutually exclusive projects. 8. You should accept a project when the ?: net present value is negative. profitability index is less than 1 but greater than 0. discounted payback period is less than the required period. AAR is less than the required return. 9. The crossover point ? : is used to determine which one of two internal rates of return for a project should be used when determining if a project should be accepted. 2. is the…
QUANTITATIVE. Fill in the following statements based on the below project financial analysis. a. The Net Present Value is b. The Return on Investment is c. The project will break even (make back its costs) in Year d. This project Created by: Praju Manageski Note: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure to Discount rate Costs Discount factor Discounted costs Benefits Discount factor Discounted benefits profitable because the ROI and NPV are both Financial Analysis for Project GGU Assume the project is completed in Year 0 Discounted benefits -costs Cumulative benefits - costs ROI 5% 10,000 1.00 10,000 0 1.00 0 (10,000) (10,000) 16% 0 0.95 2,000 0.95 1,905 Year 0 0.91 5000 0.91 4,535 1,905 4,535 (8,095) (3,560) 0 0.86 . 6000 0.86 5,183 5,183 1,623 10,000 11,623 1,623 NPV
Which of the following is true? Discounted Payback Period is by definition longer than the Non-Discounted Payback Period as long as the discount rate is greater than zero. A project has a positive NPV if its Profitability Index is less than 1. a and b None of the above
If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is: Select one: O a. equal to 16% O b. greater than 16% O c. less than 16% O d. cannot be determined from this data
The internal rate of return (IRR) is the: Multiple Choice discount rate that results in a zero net present value for the project. discount rate that causes a project's aftertax income to equal zero.
Project Analysis. Assume that you are evaluating the following three mutually exclusive projects: A. Complete the following analyses. (For the last two lines, Terminal Value, please write in the dollar amount of the terminal value.) B. Compare and explain the conflicting rankings of the NPVs and TRRs versus the IRRs. C. Using different discount rates, is it possible to get different rankings within the NPV calculation? Why or why not? D. If 10 percent is the required return, which project is preferred? E. Which is the fairer representation of these two projects, TRR or IRR? Why?
Your firm is considering what has been estimated to be a positive NPV project (NPV > 0). What can you say or infer about the project's payback period, discounted payback method, IRR, profitability index, and accounting rate of return?
The firm should accept a project if: the profitability index is greater than or equal to 1. the payback period is less than the life of the investment. the internal rate of return is positive. the internal rate of return is greater than the accounting rate of return.
Assume a project has a discounted payback that equals the project's life. The project's sales quantity must be at which one of these break-even points? Select one: O a. Accounting O b. Leveraged O c. Marginal O d. Cash Oe. Financial
Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two projects, A or B, is better in terms of internal rate of return?