How can the working-capital requirements significantly reduce a project's profitability or rate of return?

Q: The difference between APV approach, NPV approach and Weighted Average Cost of Capital approach to…

A: Capital budgeting is a technique to evaluate the profitability or value of the project by using…

Q: Assuming that your capital is constrained, which project should you invest in last?

A: Here we will have to use the PI (profitability index) ratio. We know that profitability index = 1 +…

Q: Which of the following cash flows should not be considered when evaluating a project? Changes in…

A: Following cashflows should not be considered when evaluating a project-

Q: Is it worth the effort to estimate daily project cash flows?  Would doing so be helpful in the…

A: Cashflows are usually estimating yearly and then discounted at an appropriate discount rate

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: How capital expenditure(investment) analysis helps in making long term decision to determine…

A: Capital Expenditure Decisions include those decisions which require deciding on the purchase of…

Q: We should accept a project if the Net Present Value is positive and the Internal Rate of Return is…

A: Net present value is referred as the difference between the cash inflow's present value and also…

Q: What are the advantages of using the NPV method of assessing capital budgeting projects over the Pay…

A: Capital budgeting analysis is useful to know which projects are profitable and which are not. There…

Q: Which projects should the manager choose? If you were given unlimited capital, which projects should…

A: Net Present Value is the difference between present value of cash inflows and present value of cash…

Q: How can the calculation of Net Income Attributable be done to a new project?

A: The question is based on the concept of Net Income Attributable for new projects.

Q: Critically assess how a failed capital project may also shape the future strategy of investment…

A: Capital projects are nothing but a long-term capital-intensive initiative aimed at expanding on,…

Q: Why is the original cost estimate corrected based on buyout data?

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

Q: Which of the following is NOTa relevant cash flow and thus should not be reflected in the analysis…

A: Sunk cost is the cost that has been incurred and it would not be recovered in future. It depends on…

Q: importance of the Technique

A: Capital budgeting refers to the process undertaken by the business for evaluating the projects or…

Q: Should capital budgeting decisions be made solely on the basis of project’s NPV?

A: Net present value is the method of capital budgeting, under this method the present value of future…

Q: Why do we need to predict how certain costs will behave in response to change activity in project…

A: Cash flow analysis is the way by which financial health of the company can be checked. In this…

Q: How can a developer create value over and above their project cost when attempting to obtain…

A: Financing refers to a process of raising funds for business activities, and making purchases or…

Q: Why is risk incorporated into capital budgeting and how is it incorporated into the process of…

A: Capital budgeting is the process of evaluating different investment projects that require capital…

Q: Under what circumstances the cross over rate will be an important point in capital budgeting. Can it…

A: Capital Budgeting is a process in which the company decided on the project investments which would…

Q: Describe the method of Investment Decision for a Nonsimple Project?

A: In a simple investment, cash flows change sign only one time. For example, negative cash flow in the…

Q: xplain why sunk costs should be excluded from a capital budgeting study while opportunity costs and…

A: answer are as follows

Q: How can we determine the Incremental Analysis for Cost-Only Projects?a

A: Answer: In capital budgeting, incremental analysis is one of the most common decision making methods…

Q: What is the Incremental (Marginal) Tax Rate in Project Evaluation?

A: Tax:   A tax is a compulsory charge or a levy imposed upon a taxpayer by a government organization…

Q: What is the value added by the design of the financing package? How does it alter both the return…

A: The question is based on the concept o the financial package, which is explained as a complete…

Q: How can we measure the true rate of return of any internal portion of an investment project?

A: True rate of return means real rate of return on investment. It is the actual return earned on an…

Q: What do we mean by the economic life of a project?

A: The time span for which an asset or a project generates profits for the owner is known as the…

Q: How is the Rate of return is an intuitively familiar and understandable measure of project?

A: Company enters into diversification once it reaches a profit level. Expanding the business is part…

Q: Why is it important to make the distinction between company required rate of return (WACC) and…

A: WACC is the weighted average rate of return. It is the average cost of funding for a company.…

Q: What do we call the cost of capital at which the two projects have the same NPV?

A: The term cost of capital refers to the cost that the company incurs in raising capital from…

Q: For a capital investment project to be acceptable, it must generate a rate of return  A) Less than…

A: The correct answer id Option (B).

Q: Describe the Incremental Analysis for Cost-Only Projects?

A: The incremental cost is the additional cost incurred for producing an additional one unit of a…

Q: What type of projects does the Payback method favor?

A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…

Q: ic   net  present   value  model of capital budgeting  deal with the problem of project risk?  What…

A: Introduction : In simple words, net present value refers to the amount that is calculated by…

Q: Calculate internal Rate of Return of the project. Should the project be accepted? If reinvestment…

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

Q: Financially, what is the economic worth of outbidding thecompetitors for a project?

A: Companies often exploit opportunities in the market because they will create positive NPV for the…

Q: Define the term Profitability Index? How can we consider the profitability index of a project?

A: The profitability index (PI), then again alluded to as the value investment ratio (VIR) or profit…

Q: Should capital budgeting decisions be made solely on the basis of a project’s NPV?Explain.

A: Capital budgeting decisions are based on various factors in which NPV is one of the factors which…

Q: When can a project may fail the net-investment test?

A: Yes, a firm can initiate the withdrawal of the amount invested from the investment pool in which…

Q: What is the relationship between return on capital investment and the risk associated with the…

A: Return on invested capital is referred as an amount of the funds of the corporation, which helps in…

Q: Explain Incremental Analysis for Cost-Only Projects?

A: The question is based on the concept of incremental analysis used in capital budgeting.