The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule. Introduction: NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

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Answer 1

Question

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

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Students have asked these similar questions

What is the p-value and do we reject or do we not reject?

Will the payback period, NPV, and IRR always lead to the same decision? Why or why not? If not, which one should be used?

Is the accept-or-reject decision rule the same as in the simple -investment case? Explain how?

Answer 2

Question

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

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Answer 3

Question

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

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Answer 4

Question

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

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Answer 5

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

Answer 6

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

Answer 7

Chapter 7.3, Problem 2CC

Summary Introduction

To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the NPV rule.

Introduction:

NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the present value of cash outflows from cash inflows.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 7.1 - Explain the NPV rule for stand-alone projects.Ch. 7.1 - What does the difference between the cost of...Ch. 7.2 - Prob. 1CC Ch. 7.2 - If the IRR rule and the NPV rule lead to different...Ch. 7.3 - Can the payback rule reject projects that have...Ch. 7.3 - Prob. 2CC Ch. 7.4 - For mutually exclusive projects, explain why...Ch. 7.4 - What is the incremental RR and what are its...Ch. 7.5 - Prob. 1CC Ch. 7.5 - Prob. 2CC

Solution Summary: The author explains that Person X should follow the NPV rule, as it correctly interprets the accurate timing of the cash flows and the required rate of return.

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