Use the information below to answer Question#40:GIVEN: The XYZ Company is considering the following project with its corresponding financial data.The Company requires a 9% return from its investments.$ 500,000$ 200,000$ 225,000$ 245,000Initial investment:Expected Cash in-flow Year 1:Expected Cash in-flow Year 2:Expected Cash in-flow Year 3:Present Value Factor of 1 at 9%:n=1: 0.91743n=2: 0.84168n=3: 0.7721840) Choose from one of the following that accurately depicts this decision:A) This investment should not be considered because NPV is a negative $62,048B) This învestment should be considered because NPV equals positive $62,048C) This investment should be considered because the IRR for this investment is obviouslyless than its Required Rate of ReturnD) B and Care both correct

NPV is sum of present value of cash flows Present value of cash flow = Cash flow*Present value…

40) Choose from one of the following that accurately depicts this decision: A) This investment should not be considered because NPV is a negative $62,048 B) This investment should be considered because NPV equals positive $62,048 C) This investment should be considered because the IRR for this investment is obviously less than its Required Rate of Return D) B and C are both correct

40) Choose from one of the following that accurately depicts this decision: A) This investment should not be considered because NPV is a negative $62,048 B) This investment should be considered because NPV equals positive $62,048 C) This investment should be considered because the IRR for this investment is obviously less than its Required Rate of Return D) B and C are both correct

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following statements is true? O The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project. O The internal rate of return method assumes that the cash flows generated by a project are reinvested at a rate of return that equals the company's cost of capital. O The profitability index and the internal rate of return will always result in the same preference ranking for investment projects. O In calculating the profitability index, the initial investment in the project should be reduced by any proceeds from the sale of old equipment. O None of the above statements is true.
A situation in which taking one investment prevents the taking of another is(are) called: O Net present value profiling. Operational ambiguity. Mutually exclusive projects. O Issues of scale. O Multiple rates of return.
Consider the following statement: “In contexts of increased uncertainty, the usefulness of real options when valuing an investment opportunity increases”. Do you agree with this statement? Explain your answer.
7.For a lending investment project, which of the following is a bad decision rule? If IRR is less than cost of capital: reject If IRR is greater than cost of capital: accept If profitability index is less than O: accept If profitability index is greater than O:accept
In choosing where to invest, return and risk for an investment must be compared. It is not sufficient to choose an investment based only on return without taking risk into consideration. There are two methods or measures that compare return and risk. State these two methods, the formula for each and the criteria used in evaluating alternative investment of each method.
Indicate whether its True or False. Then write the explanation! The twin advantages with using the IRR method as opposed to the NPV method for project evaluation is that you don’t need to worry about what an appropriate risk- adjusted discount rate might be for the project and you will always get the correct answer to the investment decision.
If the net present value of a proposed investment is negative, what is the discount rate used? O Less than the project's internal rate of return. Less than the minimum required rate of return. Greater than the project's internal rate of return. Greater than the minimum required rate of return.
Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?
D6) What are the determinants of Required Rate of Return. Explain the reasons of not shifting SML curve upward or downward even after changes occur in determinants of nominal Risk free rate?
Give typing answer with explanation and conclusion Please could you anwser it with true or false : Q1)Risk-neutral evaluation assumes that the expected return on the underlying asset is the risk-free rate and discounts at the risk-free rate.
When different investment rules give conflicting answers, then decisions should be based on the Net Present Value rule, as it is the most reliable and accurate decision rule True False
Below are some statements about risk and investment appraisal. Which one is incorrect? A. Risk-adjusted hurdle rates could be used to allow for the risk of a project B. Risk could be allowed for in a project by shortening the pay-back period C. While sensitivity analysis does not directly imbed risk in the appraisal process it is helpful for identifying "key" variables D. Risk decreases with the length of a project E. Probability analysis can be used to allow for the risk of different economic conditions

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