In Future Worth Analysis, the best alternative when there is a fixed amount of capital to invest is the alternative with the O highest FW of benefits lowest FW of benefits minus FW of costs. O lowest FW of costs. O highest net future worth.

In Future Worth Analysis, the best alternative when there is a fixed amount of capital to invest is the alternative with the O highest FW of benefits lowest FW of benefits minus FW of costs. O lowest FW of costs. O highest net future worth.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

See similar textbooks

Related questions

Q: Can I calculate the Rate of Return using the NPV/initial investment? Why or why not?

A: When an investment is made in a certain project, its future outcomes are measured based on the money…

Q: A1

A: that an investor expects while putting his investment value at stake. State of Nature…

Q: what is apr? do we use APR or EAR when we are calculating the present value of investment? is APR…

A: The term APR stands for Annual percentage rate. It reflects the amount of simple interest being owed…

Q: What is a satisfiable investment? When the present value of benefits surpasses the cost of an…

A: This question explains about the present value of benefits surpasses and the cost of an investment…

Q: When using present worth to evaluate the attractiveness of a single investment alternative, what…

A: To calculate the attractiveness of investment there is need to calculate the present worth is…

Q: The current income is ? The investor would experience a Gain, Loss, or Neither? The total return…

A: A bond refers to the instrument which obligates the issuer to pay pre-defined interest to the buyer.…

Q: which of the following statement is true>? 1. return on equity is the ratio of total assets to…

A: Capital budgeting is a way to evaluate profitability of new projects or investment by using various…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment wherein the present value of benefits after…

Q: We should accept a project if the Net Present Value is positive and the Internal Rate of Return is…

A: Net present value is referred as the difference between the cash inflow's present value and also…

Q: As the level of risk increases, the corresponding cost of capital (i.e. the return) must…

A: As there is an increase in the risk level, investors would be demanding a higher return on an…

Q: If the net present value of a proposed investment is positive

A: Net present value method (NPV): Net present value method is the method which is used to compare the…

Q: Present value is a. the value now of a future amount. b. the amount that must be invested now to…

A: Present Value: It states that the value of money today is worth more than the same amount of money…

Q: What is the equivalent total investment cost (future worth)?

A: Answer: Equivalent total investment cost (future worth) method discounted cash flow method converts…

Q: If net present value for a project is negative, then____. a. IRR is equal to Cost of capital b. IRR…

A: Net present value is the difference between the present value of cashflows discounted at the cost of…

Q: What do you know about the mathematical value of the internal rate of return of a project under each…

A: Internal rate of return(IRR) is rate at which net present value(NPV) of project is equal to zero or…

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: If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

A: False If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

Q: lternatives’ useful lives are different, B/C ratio analysis should preferably be based on: Select

A: Introduction : In simple words, the benefit to cost ratio is method to evaluate the effectiveness of…

Q: The values of the future net incomes discounted by the cost of capital are called question Select…

A: Future value/future cash flow discounted by the COC gives Present value/ PV of cash flow.

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: Consider the following payoff table that represents the profits earned for each alternative (A, B,…

A: Given that A,B and C are alternatives of profit earned and S1, S2 ,S3 are states of nature .…

Q: Mattrah LLC Co has 3 million ordinary shares. These shares are currently valued on the Stock…

A: Theoretical ex-right price of an ordinary share refers to the market price of the stock that have…

Q: If net present values are used to evaluate two investments that have equal costs and equal total…

A: Net Present Value is determined by discounting net cash flows by an appropriate required rate of…

Q: A project is economically feasible if: O a. ts future worth is less than zero O b. its annual worth…

A: Future worth is the sum of future value of cash flows. Annual worth is the equivalent annual cash…

Q: The following is a payoff table giving profits for various situations. Probability Alternative 1…

A: The payoff table is a list of all possible alternatives and it provides the possibilities of the…

Q: If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR,…

A: MARR is the minimum return the management requires from a project after adjusting the risks and…

Q: Identify the one true statement. a. The B/C method determines the ratio of the present worth of…

A: Capital Budgeting involves long-term planning and monitoring of capital expenditure, besides…

Q: When comparing multiple mutually exclusive alternatives, select the alternative that __________ the…

A: When given alternatives are mutually exclusive only one can be selected because only one is needed.…

Q: The expected rate of return of an investment ________. a. equals one of the possible rates of…

A: Expected or average return is the return calculated by obtaining the mean value of a distribution.…

Q: There are some cases in which the present worth (( PW )) of an investment is positive while its…

A: Investments are the methods adopted by individuals and corporations for the purpose of parking or…

Q: The future benefits received from investing in a project are the projects? Net cash flows Net…

A: Net cash flows are the returns from the project generated and received in the future.

Question

In Future Worth Analysis, the best alternative when there is a fixed amount of capital to invest is the
alternative with the
O highest FW of benefits
lowest FW of benefits minus FW of costs.
lowest FW of costs.
O highest net future worth.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If alternatives’ useful lives are different, B/C ratio analysis should preferably be based on: Select one: a. present worth b. annual worth c. future worth d. ROR
If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? i. PW = 0 ii. AW = 0. Solve, a. I onlyb. II only c. Neither I nor II d. Both I and II.
There are some cases in which the present worth (( PW )) of an investment is positive while its annual worth ((AW )) is negative. Select one: O True O False
4. The following is a payoff table giving profits for various situations. Probability Alternative 1 Alternative 2 Alternative 3 Alternative 4 State 1 0.4 45 16 23 44 State 2 0.35 37 59 65 33 State 3 0.25 83 72 91 55 a) Using the expected monetary value (EMV), which alternative should be chosen? b) Set up the opportunity loss table and compute the minimum expected opportunity loss (EOL). c) What is the maximum value that you would be willing to pay to decide under certainty?
Refer to the following payoff table (values are profit): State of Nature Alternative S1 S2 A1 75 −40 A2 0 100 Prior Probability 0.6 0.4 What is the expected payoff of the decision strategy (i.e. using the EMV/EP criterion)?
As the level of risk increases, the corresponding cost of capital (i.e. the return) must _____________________ . a) go up b) go down c) stay the same.
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
The expected rate of return of an investment ________. a. equals one of the possible rates of return for that investment b. equals the required rate of return for the investment c. is the mean value of the probability distribution of possible returns d. is the median value of the probability distribution of possible returns e. is the mode value of the probability distribution of possible returns
If a capital project has a hurdle rate higher than its internal rate, then its profitability index is
When comparing multiple mutually exclusive alternatives, select the alternative that __________ the annual worth. a. minimizes b. maximizes
The net present value (NPV) method estimates how much a potential project will contribute to Business ethics/Shareholders Wealth/Employee Benefits, and it is the best selection criterion. The Smaller/Larger the NPV, the more value the project adds; and added value means a Higher/Larger stock price. In equation form, the NPV is defined as: CFt is the expected net cash flow at Time t, r is the project's risk-adjusted cost of capital, N is its life, and cash outflows are treated as negative cash flows. The NPV calculation assumes that cash inflows can be reinvested at the project's risk-adjusted RD/RS/WACC. When the firm is considering independent projects, if the project's NPV exceeds zero the firm should Accept/Reject the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the Lowest Positive/Lowest Negative/Highest Postive/ Highest Negative NPV.Quantitative Problem: Bellinger Industries is considering two projects for inclusion…