Which of the following statements is (are) true about project appraisal methods: (i) NPV is the best measure for project appraisal even when capital is rationed. (ii) IRR measures percentage returns of an investment rather than added value. (iii) Contrary to real options, NPV assumes a now or never decision to invest

Q: Is the net-investment test the only way to accurately predict projectborrowing?

A: Net investment refers to the total amount of money that a company invests in capital assets which is…

Q: Which of the following statement is   true?   O a. Sunk cost is not relevant in   capital…

A: Capital budgeting decisions are used to evaluate new projects, opportunities, and investments such…

Q: How can we use the internal rate of return to evaluate whether we should pursue a specific project?…

A: It is important for the investors to evaluate the project in all aspects before making any…

Q: A project is accepted if, Net present value of the project is positive. IRR is lower than cost of…

A: Net Present Value method is used to ascertain whether the proposal should be selected or rejected…

Q: Which of the following contributes positively to the value of a real option to delay investment?…

A: Real option:A real option is a selection made open to a firm's managers on prospects for business…

Q: The conflicts in project ranking in capital budgeting as per NPV and IRR may arise because of:…

A: Time value of money:   It is a concept that states the money worth we have at present will be more…

Q: Option values are extinguished when they areexercised. How does this influence capital budgeting…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: If a net present value analysis for a normal project gives an NPV greater than zero, an internal…

A: NPV greater than 0

Q: Many times, project decision makers do not rely solely on financialhurdles, such as return on…

A: Intangible factors are those factors which can not be seen touched or felt. These factors are really…

Q: Should capital budgeting decisions be made solely on the basis ofa project’s NPV, with no regard to…

A: Net present value is a method of capital budgeting. In this technique, the current estimation of…

Q: Which of the following is NOTa relevant cash flow and thus should not be reflected in the analysis…

A: Sunk cost is the cost that has been incurred and it would not be recovered in future. It depends on…

Q: pted when profitability index will be greater than one b. All statements are corre

A: Profitability index indicates present value of cash inflows as no. of times of present value of cash…

Q: Consider the following statement: In a capital rationing problem withdivisible investments, if all…

A: Capital rationing is a technique used in capital budgeting to maximize profitability by restricting…

Q: Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a…

A: Capital investment is defined as an amount, which used to get invested in the corporation for…

Q: Which of the following is not a variable when setting the project bid price. Multiple Choice   Risk…

A: Net present value  It  is the difference between the present value of cash inflows(Discounted value)…

Q: Traditional NPV analysis usually does not address the decisions that managers have after a project…

A: Capital budgeting techniques are used to determine whether the investment is profitable or viable.…

Q: Which of the following is NOT relevant to the evaluation of a proposed project? Incremental cash…

A: While eveluating a project all the initial cash flows and subsequent cash flows are considered. All…

Q: Which of the above statements are correct?

A: Net Present Value: It is the present value of the annual cash flows and the initial cost of the…

Q: Projects are also often embedded with different options that can help making decisions under…

A: The real options used to increase the value of a capital investment in the project because it gives…

Q: Which of the following statements regarding the net present value rule and the rate of return rule…

A: The question is based on the concept of Financial analysis.

Q: Compare capital budgeting decision criteria, Net Present Value (NPV) and Internal Rate of Return…

A: Part (1): Answer: Net present value approach predicts how much a future project would add to the…

Q: Help question 21

A: NPV = $ 300

Q: When two mutually exclusive projects are being compared, explain whythe short-term project might be…

A: Mutually exclusive projects are the projects with same purpose. Hence, a company chooses only one…

Q: What are the shortcomings of the internal rate of return criterion? How do you make an investment…

A: Internal rate of return is the discount rate at which the present value of the future cash flow and…

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: capital projects

A: Option A is wrong because the establishment of a ranking procedure based on quantitative criteria…

Q: entify if each of the following would be included or excluded in forecasting cash flows for a…

A: When forecasting future cash flows only those cash flows, which will incur in future [ incremental ]…

Q: Assuming that a project has already been evaluated using the following techniques, the evaluation…

A: There will be no effect on change in residual value of project, if the payback period is less than…

Q: .

A: a. Payback period b. Internal rate of return c. Profitability index d. Net present value

Q: Which of the following statements is CORRECT?

A: Net Present Value (NPV) Net Present Value method is a discounting cash flow technique used in…

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: If a firm can structure a project such that expenditures can be madein stages rather than all at the…

A: When expenditure of any project are made in different stages rather than at the beginning then the…

Q: profitability

A: Profitability index is defined as the method of determining the attractiveness of an investment. The…

Q: If the initial cost of an investment project is not totally sunk (the project is not totally…

A: given information sunk cost is irreversible cost, the explanation starts from the step 2

Q: O The NPV and IRR methods, when used to evaluate two independent and equally risky projects, will…

A: The discounted technique of net present value (NPV) is used to assess the effectiveness of a…

Q: The relationship between NPV and IRR is such that a. both approaches always provide the same ranking…

A: IRR is the required rate of return for the project to have zero Net Present value.   Net present…

Q: If the net present value of a proposed investment is negative, what is the discount rate used? Less…

A: Net present value (NPV) is the significant present value difference between cash outflows and cash…

Q: disadvantage of using the accounting rate of return to evaluate investment alternatives is that…

A: Accounting rate of return (ARR) is a way of comparing profits that a business or a project is…

Q: Below are some statements about risk and investment appraisal. Which one is incorrect? A.…

A: risk increase with the length of a project.

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.