What are the three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain. Why is the NPV of a long-term project (one for which a high percentage of its cash flows occur in the distant future) more sensitive to changes in the WACC than that of a short-term project?

Q: Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before…

A: The net worth of the project after the deduction of the current worth of the cash outflows from the…

Q: What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV:…

A: Introduction: This question is related to the concept of capital budgeting. It is nothing but an…

Q: If a project with conventional cash flows has an IRR equal to the required return, then: O The…

A: IRR is the actual rate of return earned on the project while the required return is the discount…

Q: Which of the following is CORRECT? Select one: a. If the NPV of a project is negative, the IRR for…

A: NPV is a technique that helps the company to analyze the viability of the project i.e. the company…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: WACC is the required rate of return, where as IRR is the actual rate of return of the project. NPV…

Q: Explain how inflation impacts capital budgeting analysis.  Why do we care? How is NPV impacted if…

A: Nominal rate and inflation rate are related to each other through real rate as shown below. Nominal…

Q: two mutually exclusive projects were being compared, would a high cost of capital favor the…

A: Step -2 in the answer

Q: Which one of the following statements is correct?

A: If the internal rate of return equals the required return, the net present value will equal zero.

Q: Which of the following is true about the WACC? It’s the appropriate discount rate for all new…

A: Solution:- Weighted Average Cost of Capital (WACC) means the minimum rate of return required by the…

Q: Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What…

A: Year 0 cashflow (CF0) = - $1000 CF1 = $450 CF2 = $450 CF3 = $450 r = 10% n = 3 years

Q: What will happen to the internal rate of return (IRR) of a project if the discount rate is decreased…

A: IRR is the rate where the NPV of the project is ZERO

Q: Which of the following statements is correct regarding the payback method? Takes account of…

A: Payback period is a tool of capital budgeting used to evaluate projects and investments.

Q: dependent capital investment project requires an initial cash outflow at time 0, followed by cash…

A: NPV is net present value that is difference between present value of cash flow and initial cash flow…

Q: There Is no correlation between net present value and Internal rate of return. A project with a…

A: Net present value that is NPV difference between present value of cash flow and initial investment.…

Q: Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before…

A: Initial cost = $1,000 Annual cash inflow (Year 1 - 3) (CF) = $410 Period (n) = 3 Years Old WACC (r1)…

Q: What do you know about the mathematical value of the internal rate of return of a project under each…

A: Internal rate of return(IRR) is rate at which net present value(NPV) of project is equal to zero or…

Q: You have determined the profitability of a planned project by finding the present value of all the…

A: We determine the profitability of project by discounting the future cash flows with appropriate…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Statement A: FALSE Because project NPV is found by discounting the cash inflows at a discount rate…

Q: return

A: MIRR or the modified internal rate of return assumes that the company's cash flows can be reinvested…

Q: Whenever the present value of the project is greater than the initial cash outlay then both the NPV…

A: Net present value is present value of cash inflows less present value of outflows. PI i.e.…

Q: Which one of the following statements is correct concerning the payback rule?   a. The payback…

A: Answer -   Payback Period -  The payback period is the amount of time it will take to recover the…

Q: internal rate of return (IRR): Group of answer choices will always lead to the same decision as…

A: IRR is a method used for investment appraisal. It is the rate of return at which the present value…

Q: Help question 21

A: Rate of return is a profit of an investment over a specified period of time, expressed as…

Q: Which of the following statements is CORRECT? Group of answer choices If two projects are mutually…

A: Internal rate of return is a method used in capital budgeting to evaluate long term cashflows…

Q: The decision rule for net present value is to: Select one: O a. accept all projects with positive…

A: Net Present Value ("NPV") is a capital budgeting method under which, present value of future…

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: Which of the following is correct?

A: The payback period is the time duration taken to reap back the amount invested in the project. The…

Q: calculates that a project with conventional cash flows and a required return of 14% has a negative…

A: Internal rate of return when net present value is zero that means present value of cash flow is…

Q: Which of the following would cause a project to have a lower net present value, thereby making the…

A: Capital budgeting techniques include: Net Present Value Profitability Index Internal Rate of Return…

Q: Explain why the NPV of a relatively long-term project, defined as one for whicha high percentage of…

A: NPV of a project is determined as below: NPV=PV of Cash Inflows -Initial OutlayPV of Cash…

Q: Which statemen is true?   A.   IRR and NPV always lead to the same decision about projects.…

A: A. IRR and NPV always lead to the same decision about projects.- False (Reason- When comparing two…

Q: Why do NPV method and the IRR method sometimes give different rankings of mutually exclusive…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: If the profitability index of a normal investment project is 0.5 and the initial investment required…

A: A Profitability index is a useful tool that is used by the management in order to the ranking of the…

Q: Which of the following statements is correct?   a. Since investors prefer more return and less…

A: NPV formula: NPV = -INITIAL CASHFLOW+ PRESENT VALUE OF FUTURE CASHFLOW

Q: 3. Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before…

A: Initial Investment = $1000 Old WACC = 8.00% New WACC = 9.75% Annual Cash inflows = $ 410 Net Present…

Q: Why is the NPV of a relatively long-term project (one for which a high percentage of its cash flows…

A: To compute NPV discounting factor is required. NPV is PV of net benefits based on future cashflows.

Q: Which of the following statements is true about the internal rate of return?   a. It is the…

A: The internal rate of return is a financial measure used to measure the attractiveness of a…

Q: O One can use the IRR rule for investment decision making without knowing the discount rate O The…

A: Question 2:   The concerned question belongs to Time value of money where different methoda are used…

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.