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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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In considering the payback period, ____.
a. it considers thetime value of money in determining the maximum allowable time periodb. it is based on cash flows both during and after the payback periodc. it gives some indication of a project’s desirability from a liquidity viewpointd. the maximum period allowed by a firm is a specific time period based on objective criteria
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- The cost of capital used in capital budgeting should reflect the average cost of the various sources of short-term funds a firm uses to acquire assets. True Falsearrow_forwardThe payback criterion has problem(s) like Select one: O A. It considers the time value of money O B. It ignores the cash outflows or inflows after the payback period and the time value of money O C. It considers the inflows and outflows after the Payback Period O D. It considers all the cash outflows or inflows of the projectarrow_forwardWhich capital budgeting technique defines returns in terms of income instead of cash flows? a) The payback period b) The internal rate of return technique c) The net present value technique d) The unadjusted rate of return methodarrow_forward
- Mathematically, how can we determine the rate of return for a project's cash flow?arrow_forwardShould financing costs be included as an incremental cash flow in capital budgeting analysis? Explain fully.arrow_forwardThe internal rate of return is the: discount rate that makes present value of cash inflows equal to present value of cash outflows. discount rate that causes a project's after-tax income to equal zero. discount rate that results in a zero net accounting return. rate of return required by the project's investors.arrow_forward
- 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 projectarrow_forwardWhat is the procedure of developing Project Cash Flow Statements?arrow_forwardIn calculating the incremental after-tax cash flows associated with a particular investment, the firm must consider many types of cash flows. Select all the incremental cash flow types below that the firm would not incorporate directly into their incremental after-tax cash flow estimates. A) revenues B) operating costs C) sunk costs D) net working captial E) opportunity costs F) financing costsarrow_forward
- Define “the stand-alone principle” applying in evaluating projects and discuss the types of cashflows in project evolution.arrow_forwardWe learn there are three primary methods used to analyze capital investment proposals. Please compare and contrast these three methods. Be sure to include strengths (benefits) and weaknesses (drawbacks) of each. Three primary methods are: Payback method Internal rate of return Net present value.arrow_forwardThis is a multiple choice question.arrow_forward
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