Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?

Q: How is the risk-adjusted discount-rate approach more commonly practiced in the real world?

A: Risk adjusted discount rate approach is an approach which is used in assessment of various long-term…

Q: How can we find the present worth of any uneven stream of payments?

A: The question is based on the concept of present value of uneven cash flow

Q: What is the marginal rate of return? How is it calculated?

A: Answer: Marginal rate of return can be defined as the return obtained or received by means of…

Q: Why is partitioning an internal rate of return important?

A: Introduction: There are two cash flow components which can form the portioning of internal rate of…

Q: What are the shortcomings of the internal rate of return criterion?

A: Solution- Internal Rate of Return (IRR)-      The Internal Rate of return (IRR) is that the discount…

Q: a. what is the difference between the discount rate used for net present value and the internal rate…

A: Discount rate used for net present value is rate which investor want to earn from a project . It is…

Q: there is uncertainty about monetary outcome and you are concerned about return and risk, then all…

A: Yes agreed to that above statement that there is no need of entire data distribution but standard…

Q: ected rate of return concept differ from that of the rea

A: There are many method of valuation of stock based on expected rate and realized return and dividends…

Q: What three flaws does the regular payback have? Does the discounted payback correctall of these…

A: Three flaws of payback period: 1. Time value of money concept is ignored by the payback period. 2.…

Q: What is the market model? How is it different from the SML forthe CAPM?

A: The market model is utilized to show how forces of supply and demand powers cooperate to decide…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: Why do conflicts sometimes arise between the netpresent value (NPV) and internal rate of return(IRR)…

A: The basic assumption between NPV and IRR method is the cash flows are reinvested. In the NPV method,…

Q: What is the payback method? What are its main strengths and weaknesses?

A: Explain the meaning of the payback method.   The payback period is the expected time period which is…

Q: Does the IRR measure ignore the scale of investment?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: Why is the additional risk not taken without expected additional return?

A: The risk-return tradeoff takes note of that the potential return increments with an expansion in…

Q: what is meant by the required rate of return

A: The return which is expected to be earned by investing in a security is known as Required Rate of…

Q: What makes the risk-adjusted discount rate approach appealing?

A: Answer: The approximation of the present cash value for high risk assets is called adjusted discount…

Q: The break-even value calculation is similar to the calculation we use for theinternal rate of…

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: The difference between the expected return and the actual return is referred to as the unexpected…

A: The excess amount over invested value that an investor estimates to realize over horizon of…

Q: o you think a person would opt to use the Payback Period Method instead of the Net Present Value or…

A: Given information : . NPV refers to the difference between the sum of the present value of expected…

Q: 10. Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?

A: MIRR stands for Modified Internal Rate of Return which is a modified version of IRR, wherein the…

Q: The interest rate is the IRR for the mixed investment. True or false?

A: Project Balance (PB) is the amount of investment that is made into a project at any given period of…

Q: What is the difference between YTD and YoY return? Provide an example

A: In the question they have asked regarding YTD and YOY differences between them so they will be…

Q: Which of the following methods does not consider the investment’s profitability? ARR Payback NPV…

A: Average rate of return (ARR) and Internal rate of return (IRR) are methods of computing rate of…

Q: why is there a trade-off between liquidity and solvency?

A: A firm may raise capital through different sources, including equity shares, preference shares,…

Q: What is the conventional-payback method?

A: Conventional Payback Method

Q: What is meant by the phrase natural hedging againstexchange rate risk?

A: Hedging is a mechanism that is used to eliminate or minimize the risk of loss that is associated…

Q: What are some criticisms of the payback method?

A: Payback Period: Payback period is the period in which the project recovers its initial cost of the…

Q: A realized return is the rate of return actually earned on an investment. Group of answer choices…

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: /hat is the exact rate of return?

A: MACHINE A         PV FACTOR PRESENTVALUE A 0 FIRST COST -8000   8000…

Q: What should be done to apply rate-of-return analysis correctly?

A: Rate of return: It can be defined as the rate of interest that has been earned by the company on the…

Q: Which type of market efficiency is not true? Why

A: An efficient market is one where the market price is unbiased and reflects all known information. If…

Q: Why Pay back period method is not as effective as NPV?

A: Payback method  It doesn't consider account inflation as well as the cost of capital. It ignores…

Q: What are the shortcomings of the payback period?

A: Payback period: The payback period assesses the time period required to recover the initial…

Q: What are the weaknesses of the payback method?  What other options do you have?

A: Pay back period is period required to recover initial amount of investment.

Q: How can we invest in two assets with dissimilar return characteristics?

A: Diversification is one of the tactics to keep in mind while forming a portfolio. Investing all the…

Q: What is the cost of accrued liabilities? If accruals have such a low cost, why don’tfirms use them…

A: An accrued liability refers to an expense a business has incurred during a specific period but has…

Q: have led to a drop in the required rate of return?

A: Required Rate of return is the minimum rate of return which an investor expects for investing in a…

Q: What are the weaknesses of the payback method?

A: Payback period is the amount of time required for firm to recover its initial investment in projects…

Q: What is net present value? Can it ever be negative? Explain.

A: Net present value: Net present value is a technique used in capital budgeting to see the project is…

Q: What are the two main drawbacks of the payback method?

A: Payback period is the method in capital budgeting which refers to the time needed to recoup the…

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.