in making single-asset real estate investment decisions, a few common ways to determine the value of the real estate would be to use the EGIM, Direct Capitalization approach or the Net Income Multiplier approach. What is often cited as a limitation associated with these types of approaches? O a. They are difficult to calculate. O b. They are complex to understand. c. They fail to incorporate cash flows beyond the first year of the analysis. Od. They are rarely used by industry professionals. QUESTION 10 In an NPV calculation, if the net present value of the future cash flows from an investment are less than the invested capital, it is an investment the firm should not make. True O False QUESTION 11 NPV and IRR have the same investment decision criteria. O True False QUESTION 12 In order to calculate the Sale Price one applies the going-out cap rate to the NOI of the last year of operation. True O False

in making single-asset real estate investment decisions, a few common ways to determine the value of the real estate would be to use the EGIM, Direct Capitalization approach or the Net Income Multiplier approach. What is often cited as a limitation associated with these types of approaches? O a. They are difficult to calculate. O b. They are complex to understand. c. They fail to incorporate cash flows beyond the first year of the analysis. Od. They are rarely used by industry professionals. QUESTION 10 In an NPV calculation, if the net present value of the future cash flows from an investment are less than the invested capital, it is an investment the firm should not make. True O False QUESTION 11 NPV and IRR have the same investment decision criteria. O True False QUESTION 12 In order to calculate the Sale Price one applies the going-out cap rate to the NOI of the last year of operation. True O False

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Why is the acid test ratio a more rigorous test of short-term solvency than the current ratio? A. The quick ratio eliminates prepaid expenses for the denominator.B. The quick ratio eliminates prepaid expenses for the numerator.C. The quick ratio eliminates inventories from the numerator.D. The quick ratio considers only cash and marketable investments as current assets.E. The quick ratio eliminates revenue from the numerator.
A disadvantage of using the accounting rate of return to evaluate investment alternatives is that Group of answer choices A. It is superior to IRR. B. When net incomes vary from year to year, the ARR will also vary across years, making the project seem desirable in one year and not another. C. It considers the time value of money. D. It is easy to understand and it allows comparison or projects. E. Using ARR has no disadvantages.
A disadvantage of using the payback period to compare investment alternatives is that it a. Ignores cash flows beyond the payback period. b. Cannot be used to compare alternatives with different initial investments. c. Cannot be used when cash flows are not uniform. d. Involves the time value of money. e. Cannot be used if a company records depreciation.
A. it is very A disadvantage of the average rate of return method of capital investment analysis is that complex to compute B. it does not include the entire amount of income earned over the life of a project C. it does not emphasize accounting income, which is often used by investors and creditors in evaluating management performance D. it does not directly consider the timing of the expected cash flows
The following is a disadvantage of ARR investment appraisal method (select one): A. multiple or no solutions B. does not take into account time value of money C. easy to explain D. management performance is rarely evaluated based on ARR
Which one of the following could be considered as an advantage of using the payback method of investment appraisal? Select one: O A. Cash flows rising after the payback period is reached are ignored O B. It is easy to understand and simple to calculate O C. Does not take risk fully into account O D. Not related to wealth maximisation objective
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. Consider the equation for the Capital Asset Pricing Model (CAPM): All assets are perfectly divisible and liquid. Investors assume that their investment activities won't affect the price of a stack. 7 = TRF + (TM - TRF) X bi -0.50 There are no transaction costs. 0.30 Assets have unique liquidity. In this equation, the term (M - TRF) represents the 1.00 Suppose that the market's average excess return on stocks is 12.00% and that the risk-free rate is 1.00%. Complete the following table expected returns to stocks for each beta coefficient using the Capital Asset Pricing Model (CAPM): 3.00 Cov(ri, TM) 02 M Expected Return to Stocks (%) Based on the CAPM and your calculations for the return to stocks, what does it mean when the coefficient b; > 1? O The stock's return correlates with the stock market as a whole. The stock is more volatile than the market.
Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.
If a firm must forgo a cash flow, not leasing an owned building for example, in order to accept some investment project, are the lost cash flows included in the analysis?
The profitability index O will never be greater than 1. O does not take into account the discounted cash flows. O allows comparison of the relative desirability of projects that require differing initial investments. O is calculated by dividing total cash flows by the initial investment.
Identify the incorrect statement in connection to working capital management: A. Conservative financing policies use short-term funds to finance only part of fluctuating current assets. B. Long-term funds are more expensive and more risky than short-term funds . C. The objectives of working capital management are profitability and liquidity. D. Permanent current assets should be financed from long-term sources if a moderate policy is adopted.
Ignoring differences in the useful lives of investments when evaluating capital expenditure alternatives A B с D cannot be addressed by adjusting cash flow assumptions of the proposals can distort present value analysis and adversely affect decisions will never distort present value analysis or adversely affect decisions reduces complexity and improves decision making

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