If a company's required rate of return is 8%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is less than 8%. greater than 8%. unacceptable for investment purposes. equal to 8%.

If a company's required rate of return is 8%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is less than 8%. greater than 8%. unacceptable for investment purposes. equal to 8%.

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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Concept explainers

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.

Question

If a company's required rate of return is 8%, and in using the profitability index method, a project's index is greater than 1, this
indicates that the project's rate of return is
less than 8%.
greater than 8%.
O unacceptable for investment purposes.
equal to 8%.

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According to the profitability index criterion, a project is acceptable if its profitability index is greater than ____. a. 0 b. 1.1 c. or equal to 1 d. 1 plus the cost of capital
Subject :- Accounting
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If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is: Select one: O a. equal to 16% O b. greater than 16% O c. less than 16% O d. cannot be determined from this data
Assume a project has three variables: life, first cost, and annual cost. Assume there is no salvage value. For each variable there are three possible values as listed below. The firm uses an interest rate of 8 percent to evaluate engineering projects. For each variable, determine which value is "optimistic" and which is "pessimistic". The remaining value is "most likely". Compute each variable's estimated mean (using the "optimistic/most likely/pessimistic" formula) and using those computed mean values, compute the project's expected present value cost. First cost: -$480,000, -$620,000, -$860,000 Annual cost: -$75,000, -$85,000, -$110,000 Life: 8 years, 10 years, 24 years What is Expected Net Present Worth?
Consider two investment opportunities A and B. Investment A: Expected return = 0.08, Standard deviation = 0.06 Investment B: Expected return = 0.24, Standard deviation = 0.08 Which investment would you choose A or B? Provide the rationale behind your decision. b. If company is selecting projects with the negative NPV, what impact this decision would have on the share price of the company c. While forecasting future sales, internal sales forecast is more appropriate or external sales forecast? d. Why are dividends the basis for the valuation of common stock? e. When the constant growth dividend valuation model is used to explain a stock's current price, the quantity (ke - g) represents the expected dividend yield. Is this statement right or wrong? Explain.
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