Answered: Most capital budgeting techniques…

Business

Accounting

Most capital budgeting techniques involve analysis of net operating profits. True or False

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Capital budgeting is the decision making process used in the acquisition of long term physical…

A: It is a decision making process which is used by the firm about the acquisition of long term…

Q: The IRR method and NPV method can differ in ranking of capital budgeting decisions. What causes…

A: The NPV is the difference between the present value of the cash inflow and the initial investment…

Q: The WACC as used in capital budgeting is an estimate of a company’s before-tax cost of capital. True…

A: A firm’s capital structure is a mix of debt and equity. The cost of procuring such debt and equity…

Q: Which of the following statements regarding capital budgeting analysis is correct? NPV assumes…

A: Capital budgeting is the process of making investment decisions by a company in which different…

Q: For the purpose of performing capital budgeting analysis, we need to look at incremental cash flows…

A: In capital budgeting analysis, businesses evaluate potential investment opportunities to determine…

Q: “Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.

Q: Sophisticated capital budgeting techniques do not A. examine the size of the initial outlay. B.…

A: Capital budgeting techniques are used to understand the feasibility/acceptability of long term…

Q: True or False: In solving a classical capital budgeting problem using binary linear programming…

A: The question is based on the concept of linear programming problem in decision making for long term…

Q: Why is capital cost allowance used instead of depreciation expense in capital budgeting?

A: Capital cost allowance: is an annual deduction which can be claimed on depreciable asset while…

Q: The accrual accounting rate-of-return method has a significant weakness for use in making capital…

A: The accrual accounting rate of return refers to the percentage of return that is ecpected form the…

Q: What is the main disadvantage of discountedpayback? Is the payback method of any realusefulness in…

A: The discounted payback method is a method of evaluating the payback period of the investment carried…

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: Is capital budgeting decisions can be reversed

A: In capital budgeting we review different projects to determine their financial feasibility and…

Q: Cash surplus and economic assumptions are components of a financial planning model. True or False

A: Future is uncertain and it contains various risk factors. Financial planning (FP) model is used to…

Q: chance that a cash flow will turn out to be worse than the estimate. b. the chance that a…

A: Step 1 The planning process used to assess whether an entity's long-term investment is appropriate…

Q: True or false? One way to address risk for a capital budgeting problem is to conduct scenario…

A: Capital budgeting plays a pivotal role in determining the feasibility and profitability of long-term…

Q: There are different methods utilized in making capital budgeting decisions. The one method that is…

A: The payback method is a capital budgeting technique that is used to determine the amount of time…

Q: In capital budgeting, a project is accepted only if the internal rate of return equals or: a.…

A: Internal rate of return is often used to determine the financial feasibility of an investment…

Q: In a capital budgeting study, explain why sunk costs should not be included, but opportunity costs…

Q: True or False: Sophisticated firms use only the NPV method in capital budgeting decisions. True…

A: When choosing between two methods Net Present Value (NPV) and Internal Rate of Return (IRR), it is…

Q: “Only quantitative outcomes are relevant in capital budgeting analyses.” Do you agree? E xplain.

A: “Only quantitative outcomes are relevant in capital budgeting analyses”. This statement is…

Q: The computations involved in the net present value method of analyzing capital investment proposals…

A: (I) NPV method of analyzing the capital investment is complex and involves more computations than…

Q: Why are discounted cash flow methods of making capital budgeting decisions superior to allother…

A: Discounted cash flow: it is a valuation method. This method helps in determining the Value of a…

Q: interest costs O No answer text provided. O externalities O opportunity costs

A: In the capital budgeting there is need to calculate the incremental cash flow and based on the…

Q: The cost of capital used in capital budgeting should reflect the average cost of the various sources…

A: Cost of capital reflects long term funds like debt and equity yo acquire assets

Q: In capital budgeting, one advantage of the internal rate of return is that it does not require the…

A: Introduction: Capital budgeting: Capital budgeting is the technique used for analyzing the…

Q: Describe Capital budgeting techniques with their respective strength and weakness for IRR , NPV , PI…

A: Capital budgeting is the process used by the companies to determine whether to invest in a long-term…

Q: The focus in capital budgeting is on a. Favorable and unfavorable variance b. Expenses under…

A: Capital budgeting :- It is process in which different long term investment proposal are evaluated…

Q: WHAT ARE THE PROBLEMS WITH IRR APPROACH TO CAPITAL BUDGETING?

A: IRR internal rate of return is very common method of capital budgeting decisions making.

Q: escribe the advantages and disadvantages of several capital budgeting method

A: Capital budgeting refers to the process of evaluating the different high-cost opportunities in order…

Q: In capital budgeting analysis, when computing the weighted average cost of capital, the CAPM…

A: CAPM model is used determine the cost in capital budgeting decisions.

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Most capital budgeting techniques involve analysis of net operating profits.
True or False
True
False

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which of the following is not a reason for risk and uncertainty in capital budgeting? a. Decisions are based on expected cash flows b. All decisions are based on forecasts c. Decisions are based on past cash flows d. All forecasts are subject to uncertainty Clear my choice
Net present value and the payback period are examples of discounted cash flow methods used in capital investment decisions. Group of answer choices True False
Capital Budgeting is acquiring inputs with long term returns. Which of the following author gave the above definition? a. Charles Richard b. Lyrich c. Charles T.Hrongreen d. Richard Green Law
h. What does the term “risk” mean in the context of capital budgeting; to what extent can risk be quantified; and, when risk is quantified, is the quantification based primarily on a statistical analysis of historical data or on subjective, judgmental estimates? i. 1. What are the three types of risk that are relevant in capital budgeting? 2. How is each of these risk types measured, and how do they relate to one another? 3. How is each type of risk used in the capital budgeting process? j. 1. What is sensitivity analysis? 2. Perform a sensitivity analysis on the cost per unit, unit sales, and salvage value. Assume each of these variables can vary from its base-case, or expected, value by plus or minus 10%, 20%, and 30%. Include a sensitivity graph, and discuss the results. 3. What is the primary weakness of sensitivity analysis? What is its primary usefulness?
Identify “relevant” cash flows that should and should not be included in a capital budgeting analysis.
Which of the following statements is FALSE? A. When evaluating a capital budgeting decision, we generally include interest expense. B. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. C. Many projects use a resource that the company already owns. O D. As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.
How is the estimation of relevant cash flows one of the most important parts of this capital-budgeting process?
e) How does the basic net present value model of capital budgeting deal with the problem of project risk? What are the shortcoming of this approach
None
The capital budgeting is associated with Select one: a. Short term assets b. Fixed assets c. None of the options d. Long terms assets e. Long terms and short terms assets
In many decisions, the focus is on net income. Accounting net income is based on accrual accounting, which ignores the timing of cash flows. In capital budgeting, however, the timing of cash flows is critical. Why do you think that is? Respond to why agree or disagree with their reason for the criticality of cash flow timing in capital budget decisions.
Should interest expenses and dividend be included as an incremental cash flow in capital budgeting analysis? Please explain.