Would you expect an abandonment option to increase or decrease a project’sexpected NPV and risk (as measured by the coefficient of variation)? Explain.

Q: Differentiate between unacceptable investment alternatives and potentially acceptable ones?

A: An unacceptable investment refers to a financial asset or opportunity that carries significant risks…

Q: Summarizes the IRR computation for a mixed investment?

A: IRR for Mixed investmentBalances of project cash flow are both positive as well as negative. The…

Q: Is the project viable or not? Suggest reasons

A: The viability of a project is examined in a feasibility study to ascertain the likelihood of…

Q: Does the Analysis Period Equal Project Lives?

A: Yes, the analysis period equals the project lives.

Q: For the ORI to be truly optimal, it must maximize present worth over the planning horizon. True or…

A: In this question, we are required to determine whether the statement is true or false.

Q: Why is there conflict between the NPV and IRR criteria between projects Y and Z? Which is typically…

A: In this question, we are required to determine the reason for conflict between IRR and NPV. Also, we…

Q: Describe the Project selection rules under the IRR criterion?

A: IRR (Internal rate of return) is one of capital budgeting techniques which is used to evaluate the…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: The MARR used for a project’s acceptance or rejection is set relative to what cost?

A: MARR is a discount return which is the lowest rate of return that must be accepted in the project.

Q: When might NPS not be a good predictor of firmgrowth?

A: At times, the NPS might not be a good indicator of predictor of firm's growth as there are many…

Q: What is the y risk-free investment?

A: Risk-free rate of return is the rate of return that an investor expects from an investment in any…

Q: The internal rate of return (IRR), despite its shortcomings, can be a useful analysis tool for…

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

Q: Describe the incremental Analysis for Comparing Mutually Exclusive Alternatives?

A: The question is based on the concept of Incremental cash flow analysis of mutually exclusive…

Q: Show by using equations or a diagram, that an expected utility maximizer requires a higher return…

A: The objective of the question is to demonstrate that an investor who maximizes expected utility, a…

Q: What alternative approaches can be used to estimate variable consideration?

A: The alternative approaches that can be used to estimate variable consideration are: Expected value…

Q: A project with a negative NPV should be rejected. O True O False

A: Net present value  = present value of future cash inflows discounted at desired rate of return -…

Q: Describe the methods of determining the Project Risk?

A: Project risk is an uncertain event or circumstance that affects at any rate one objective of a task,…

Q: Which alternative is considered to be riskier, all else equal? and why?

A: Debt and Equity mix or only equity are the forms of capital structure which is chosen by the entity…

Q: Which option is most profitable, keeping or replacing?Insert numerical value. What is one relevant…

A: The old machine is replaced with a new machine only when the production is improved and there is a…

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: What is the potentially acceptable investment alternative?

A: An alternative investment is a financial asset that doesn't can be categorized as one of the…

Q: An NPV analysis is one part of a complete captial investment analysis. What is the second part that…

A: Introduction: An analysis of capital investment is the mechanism by which management prepares,…

Q: In which situation are the project lives unequal?

A: Answer: A business will face a situation where multiple capital projects display a positive net…

Q: Which project has no rate of return?

A: Answer: IRR is a measure in capital budgeting used to measure the value of the predicted…

Q: payback period, NPV, and IRR always lead to the same decision? Why or why not? If not, which one…

A: Step 1   One of the most essential choices a business owner or management will ever make is capital…

Q: Assume you were trying to decide when to stop or cease within an investment (which has been…

A: Deciding when to conclude an ongoing investment demands a strategic and multidimensional approach.…

Q: When does a project deny the merit consideration?

A: Project is assessed on the basis of various important considerations such as profitability, social…

Q: Which is the most important breakeven in the analysis of a project?

A: Projects could be analyzed by using net present value (NPV) method. In this method, projects are…

Q: How do you make an investment decision based on the IRR?

A: IRR is the return actually earned by the investor and discount rate is the return which the investor…

Q: What term refers to the uncertainty inherent in projections of future ROIC?

A: Business risks are risks of uncertainty for the company. This is a type of risk where the returns…

Q: Explain Broader Diversification Reduces Risk?

A: The investment in different financial assets is known as the portfolio of an investor. The…

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.