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The Profitability Index (PI) is a financial metric that depends only on the Present Value (PV) of expected future
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a
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False.
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b
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Only partly true.
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c
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True
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d
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Only partly false.
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Solved in 3 steps
- The internal rate of return (IRR) is The same thing as the cost of capital. The discount rate that equates the present values of cash inflows and cash outflows. The same thing as the net present value. The same thing as the profitability index.Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.Which method does not consider the time value of money? Choose the correct. A. Net present value B. Internal Rate of Return C. Average rate of return D. Profitability Index
- This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero. Group of answer choices A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodWhich of the following is the correct definition for present value (PV)? Select one: a. The current value of the sum of all the past cash flows given a specified rate of return. b. The current value of the sum of all the future profits made by the company with a specified rate of return. c. The current value of a future sum of money or stream of cash flows given a specified rate of return. d. The future value of the sum of all the future cash flows without a specified rate of return.Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value method
- A centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? O a future cash flow O a current cash flow O a market-determined discount rate O a variable income measure O a measure of probabilityThe present value of an investment's future cash flows divided by its initial cost is the: O Net present value. O Internal rate of return. O Average accounting return. O Profitability index. O Payback period.Please answer the following questions 1. _________________ is the discounted net future cash inflows divided by the initial cash outlay. a.Payback b.NRV c.Profitability Index d.IRR 2. __________________________ serves as a framework for measuring performance. a.NRV b.Payback c.Profitability Index d.Balanced Scorecard 3. Which of the following is a performance measures of the balanced scorecard: a.internal Business perspective b.all of the answers are correct c.financial Perspective d.customer perspective
- The internal rate of return equals the rate that yields a profitability index of 1 for an investment. True O FalseMake a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real Return d. Risk-free Return e. Required Return f. Holding Period ReturnIf cashflows are discounted at____ the net present value is zero a. Internal rate of return O b. Wighted average cost of capital O c. Higher payback period O d. Any payback period
