Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment.

Q: Does the accounting (book) rate of return (ARR) method provide a valid (or, meaningful) measureof…

A:

Q: Consider the advantages and disadvantages of using the accounting rate of return as an investing…

A: This question explains about  the advantages and disadvantages of using the accounting rate of…

Q: Apply the procedure to find the true IRR, or return on invested capital, of the mixed investment?

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

Q: Using a payback period rule tends to bias investors toward Select one: a. riskier investments. b.…

A: Payback period: This method is used to calculate how many years a project will take to recover its…

Q: The following are investment criteria: net present value, payback, profitability index, average…

A: The question is based on the concept of capital budgeting techniques , to ascertain the true worth…

Q: What is the capital asset pricing model (CAPM)? What does it tell us about the required return on a…

A: The required rate of return of a security is the minimum return an investor will demand from the…

Q: Why is it necessary to determine how long you can expect to reap benefit from the investment?

A: Individuals as well as firms often make investment and specify the time limit for which this…

Q: The payback method measures: The profitability of an investment. The net cash inflow from an…

A: Pay back period is most popular method of capital budgeting decisions and is quite simple to use and…

Q: The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the…

A: Based on CAPM, Expected return on security = Risk free rate + Beta * Market risk premium

Q: nt is more​ liquid, the return you receive will

A: Liquid investments are those investments that can be easily sold for cash.

Q: Another name for the expected value of an investment would be: a. The mean value b. The risk-free…

A: The expected value (EV) is an anticipated value for investment at some point in the future. In…

Q: Discounting an investment’s cash flows using the internal rate of return will result in which of the…

A: Introduction: The internal rate of return (IRR) is a research and consulting metric used to assess…

Q: When considering multiple possible investments, why are rates of return preferable than monetary…

A: An investment's net profit or loss over a certain period expressed as a percentage of the…

Q: A disadvantage of using the payback period to compare investmentalternatives is that it;

A: Payback period: The payback period is the time period required to recover the initial investment of…

Q: The following is a concise explanation of the primary investment risk characteristics that investors…

A: Introduction : Investing assessment and appraisal is crucial for investors because it is a kind of…

Q: Assets are priced such that _____________________ increase with the riskiness of future payoffs. A)…

A: Solution:- Payoff means the amount which is receivable on maturity.

Q: Suppose you know that an investment will earna positive return in the future. Why is it important to…

A: The investment may provide a positive return in the future, but the worth of receiving it in future…

Q: Describe the Procedures used to determine the rate of return internal to nonsimple investments?

A: Procedure to compute the rate of return internal to non-simple investmentIt is an investment for…

Q: Discuss how the Accounting Rate of Return as an investment appraisal method is better than the Net…

A: Accounting ROR or ARR and Net Present Value(NPV) are tools that are used to make selection among…

Q: Calculating the payback time is the most precise technique to determine the profitability of an…

A: Payback technique helps us to compute the time period in which the project's cash inflows cover the…

Q: The  payback period is more preferable and the most  accurate investment criteria that could be used…

A: The time it will take for a business to recover an investment is known as the payback period. Think…

Q: According to the Capital Asset Pricing Model, higher investment risk, however it is measured,…

A: The CAPM model is being used for finding the required rates of returns of the security for given…

Q: What strategies are available to eliminate timing problems in investments? Explain Briefly

A: Introduction to Investments  Investment is referred to as the asset which is created with the…

Q: How do you evaluate an asset whose value is dependent on future cash flow expectations

A: The Answer :

Q: What role does the correlation what role does the correlation of two assets play in computation of…

A: The answer and the explanation can be seen below:

Q: Identify two disadvantages of using the payback period for comparing investments.

A:

Q: The capital asset pricing model expresses the cost of equity as a function of a return on riskless…

A: The term capital structure refers to the structure of debt and equity financing in the company. A…

Q: Why may the net-present-value and internal-rate-ofreturn methods yield different rankings for…

A:

Q: Explain the three different ways in which the relationship between risk and required rate of return…

A: In the finance scenario, the relationship between risk and the required rate of return of an…

Q: Asset pricing Models provide a logical basis for computing the risk premiums and determining the…

A: Capital Asset Pricing Model (CAPM) is tool used to calculate the systemic risk of a asset. CAPM…

Q: When considering several possible investments, why are rates of return preferable than monetary…

A: The return, often called a financial return, is the sum of money wasted or earned on an investment…

Q: Whenever you make an investment decision, you need to consider its impacts on the diversification of…

A: Investment decision and diversification go hand in hand. One should be careful while making an…

Q: The expected value of an investment: Answer a. Is what the owner will receive when the investment is…

A: Expected Return refers to return anticipated by an investor while making investment. It may differ…

Q: When comparing investments that have different means, the measures the relative riskiness of each…

A: Risk in investment: There is certain level of risk that is attached to each investment type. The…

Q: If you were an Investor, what would you consider in investment:  Net Present Value or Payback…

A: When an investment is made the investor uses various tools to evaluate an investment. The investors…

Q: Which of the following investment strategies involves generating a higher expected rate of return…

A: The risk and return of investment are usually positively related. An investor cannot earn an extra…

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.