When analyzing a project, scenario analysis is best suited to accomplishing which one of the following? Multiple Choice Determining the minimal level of sales required to break even on an accounting basis Identifying the potential range of reasonable outcomes Estimating the residual value of fixed assets Determining how fixed costs affect NPV Determining the minimal level of sales required to break even on a financial basis

When analyzing a project, scenario analysis is best suited to accomplishing which one of the following? Multiple Choice Determining the minimal level of sales required to break even on an accounting basis Identifying the potential range of reasonable outcomes Estimating the residual value of fixed assets Determining how fixed costs affect NPV Determining the minimal level of sales required to break even on a financial basis

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3MC: The third step for making a capital investment decision is to establish baseline criteria for...

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Capital investment evaluation methods can be grouped into which of the following two general categories? a. Methods that use average rate of return and methods that use differential analysis b. Methods that do not use variable costing and methods that use variable costing Oc. Methods that do not use present values and methods that use present values Od. Methods that use absorption costing analysis and methods that use incremental analysis
It is good to compute first the additional benefits that a project can give and the additional cost incurred by implementing a project. This concept talks about a. Law of Supply and Demand b. Marginal Cost Benefit Analysis c. Time Value of Money d. Financial Ratios
Sensitivity analysis determines the: Multiple Choice degree to which the net present value reacts to changes in a single variable. ideal ratio of variable costs to fixed costs for profit maximization. net present value range that can be realized from a proposed project. range of possible outcomes given that most variables are reliable only within a stated range. degree to which a project relies on its initial costs.
What are the problems in using the Internal Rate of Return method when making decisions on which project/s to undertake?
Calculating Net Present Value of a project is an application of which technique: a. SWOT Analysis.b. Future value.c. Cost Benefit Analysis. d. Discounting.e. Compounding.
In making a short-term special decision, which of the following is MOST important? a. Use a conventional absorption costing method b. Focus on the total cost c. Separate variable and fixed costs d. Discount cash flow to their present values
The analysis of the effect that a single variable has on the net present value of a project is called _____ analysis. Group of answer choices variable erosion sensitivity scenario cost-benefit
Why are NPV, BCR, and IRR considered SUPERIOR indicators of Project Feasibility compared to Payback or Recoupment Period and Accounting Rates of Return? Explain briefly.
Net Present Value Method Net present value (NPV) is one method that can be used to evaluate the financial viability of potential projects. It determines the present value of all future cash flows associated with potential projects and measures this against the cost of the project. To use net present value, a required rate of return must be defined. The required rate of return is the minimum -v acceptable rate of return that an investment must yield for it to make sense economically. Managers often choose a required rate of return above their cost of capital to ensure that the inherent uncertainties surrounding future cash flows is addressed. This can be risky, however, as it biases the process toward short-term projects. If the NPV is positive, then the project should be accepted - V ; if it is negative, then the project should be rejected V. Let's look at a net present value example using the present value of an ordinary annuity table. The company has a project with a 5-year life that…
Why do we need to predict how certain costs will behave in response to change activity in project cash-flow analysis?
Explain why the NPV is a more accurate measure than IRR when evaluating the financial profitability of a project.
Which term is used to represent the sales level that results in a project's net income exactly equalling zero? Group of answer choices Cash breakeven Operational breakeven Present value breakeven Financial breakeven Accounting profit breakeven