Practice : a: The computation of return on average investment ignores one characteristic of the earnings stream, which is considered in discounting cash flows. What is this characteristic? Why is it important? b: What are the disadvantages of evaluating an investment using payback period? Why might a company use this methodology despite these disadvantages?

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A: DCMs seek to evaluate the fair value of a company regardless of current market conditions, taking…

Q: Which of the following is not a correct statement O a. Profit maximization is vague conceptually.…

A: The profit maximization concept explains that the company should undertake such actions, investments…

Q: is(are)the reason(s) for profit maximization not a reasonable goal for firms. a. Profit concept…

A: Profit Maximisation Concept aims at carrying out the business activities in such a way that the…

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A: A firm evaluate if it has too many or too few current assets vs. its current liabilities by…

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A: In this question we have four question and we need to select the correct option.

Q: Consider the following two projects: Year 0 Cash Flow - 100 - 73 Project A B 22.7 45.3 18.1 Year 1…

A: As per Bartleby honor code, when multiple questions are asked, the expert is required only to solve…

Q: Which of the following statements is false? (You may select more than one answer.)a. The total-cost…

A: Capital budgeting refers to the process by which long-term investment proposals are evaluated based…

Q: Why should financial decision makers obtain a good estimate of a firm’s cost of capital? What are…

A: The cost of capital is the cost of using the funds in the business. The funds may be in form of debt…

Q: If a company has over capitalization, rate of earning is: Select one: a. equal with the rate of…

A: In case of over capitalization, a company issues more debt and equity as compared to the worth of…

Q: Can Retained Earnings grow too large? If so, what strategies might management take to reduce it

A: Answer: Retained earnings is the cumulative or collective profit hold by company in shareholders…

Q: Profitability Index is used when:   A. projects are not divisible and the company is in capital…

A: Profitability index is quite extensively used in selecting of projects.

Q: Which one of the following could be considered as an advantage of using the payback method of…

A: Solution: Payback period represents that period where the initial cost of the investment gets…

Q: Is it true that A high return on assets (Ropa) is an indication that a firm has a high level/value…

A: ROA shows how profitable a company is with respect to it sassets. formula: ROA = NET INCOMETOTAL…

Q: Decreases in economic benefits in the form of outflows or depletions of assets or incurrences of…

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Q: Contrast the modern construct for FISIM with a measure that sub- tracts deposits from the financial…

A: Financial Intermediation Services Indirectly Measured (FISIM) In general, only a small part of…

Q: Should firms focus on book value or market value capital structures? How would the calculatedWACC be…

A: In all actuality, the organization will have the option to utilize the capital structure dependent…

Q: what are the differences between the income statement and statement of cash flows and can you show a…

A: The financial statements of a company are prepared to measure the financial performance of the…

Q: What are the likely effects of a policy in which a company fails to adjust for difference in risk…

A: The cost of capital is a critical financial concept for companies. It represents the return expected…

Q: Many businesses finance their investment activities internally. Should internal financing affect the…

A: Internal financing: Under internal financing, a business firm uses its profits or assets as a…

Q: How does a short-term cash flow crisis impact a firm's competitive strategy?

A: It is very important for any business to have cash in hand or at the bank for meeting day-to-day…

Q: Provide Answer with calculation

A: Detailed ExplanationLet's address each question: Q no 1: Firm Value and Dividend Policy: In a…

Q: Why should the investment decision be separate from the financing decision? What error would…

A: At the beginning of the process of putting the project into action, there are two significant…

Q: Consider the following statements concerning the payback method of investment appraisal. 1. It…

A: The payback method of investment appraisal is a simple technique that calculates the amount of time…

Q: When using EBITDA instead of net income to measure a firm's operational characteristics, why are…

A: EBITDA means earnings before interest, tax, depreciation and amortisation. It means all these have…

Q: Which of the following explains why relative valuation is preferred over intrinsic valuation?  a.…

A: Stock valuation: It is the process of analyzing the prices of stock before investing in it. The…

Q: What are some of the pros and cons of using stockoptions to compensate managers?

A: Employee stock options: Stock options are the non-monetary incentives that are given to particular…

Q: Which of the following statements is correct?   a. Any forecast of financial requirements involves…

A: Option D is correct. Financing feedbacks describes the fact that interest must be paid on the debt…

Q: The internal rate of return method of evaluating capital investments can be used with uneven cash…

A: Uneven cash flows is a series where the cash flows are not the same throughout the project's life.…

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.