Sam is planning to start a new business. If he invests all his personal savings in the business, the interest that he could have earned on those savings is considered a(n) Blank______. Multiple choice question. opportunity cost sunk cost financing cost irrelevant cost
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Sam is planning to start a new business. If he invests all his personal savings in the business, the interest that he could have earned on those savings is considered a(n) Blank______.
sunk cost
financing cost
irrelevant cost
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- An implication of the life cycle theory is that: Multiple Choice Households are planners whose actions extend beyond their current resources and pleasurable activities today to future needs and assets to meet them. Utility can be measured in money terms. Household spending decisions are based on the amount of income they earn currently. All of the choices are correct. None of the choices are correct.Based on Poleskis current situation, will it earn its target net income? If not, how many units need to be sold to achieve the target? Explain.______ is a measure of how much value is created or added today by undertaking an investment. Multiple choice question. The internal rate of return The profitability index Net present value Average accounting return
- Please describe NPV, IRR and their relationship. How do you evaluate each for making an investment decision? That is, what is a favorable NPV and IRR for making an investment decision. If you were developing a capital budgeting process at your employer, how would you prioritize your projects? What is the NPV when IRR = WACC, IRR>WACC, and IRR<WACC? There is a duplex for sale in Absecon for $700,000 at this time. It has 2 units that generate a total of $25,000 in gross rent. The property taxes are $4,000, commercial property insurance is $2,000, flood insurance is $1,000, and annual maintenance is $2,000. You expect to sell it in one year at a price growth of 0%. What is the NPV with a WACC of 10%. Is the IRR greater or less than the WACC? Would you invest in this project and why?The NPV of renting the current machine is S. (Round to the nearest dollar.) The NPV of purchasing the current machine is S (Round to the nearest dollar.) The NPV of purchasing the advanced machine is S (Round to the nearest dollar.) Which of the following is the best choice? (Select the best choice below.) O A. Rent the current machine. B. Purchase the current machine. OC. Purchase the advanced machine.Having to decide on the purchase of a piece of machinery to improve productivity is part of the finance manager’s responsibility in ____________. Question 11 options: 1) short-term financial management 2) capital raising 3) capital budgeting 4) preparing the accounts
- The appropriate path for daily money decisions will: Multiple Choice O O take some time. take some effort. result in lower stress. result in personal financial security.What is the definition of “opportunity cost” as it relates to the time value of money? It is the loss of a potential gain choosing one alternative over another, particularly ignoring the time value of money. It is the benefit side of the cost/benefit ratio. It is the price of selling an asset. It is the amount of money invested in saving bonds. exoplain your answer give correct answerDiscuss the payback period, NPV (net present value), and IRR (internal rate of return) methods for capital budgeting analysis. What result does each method provide the user? What are the limitations of each of these methods? Which method would you find most useful in making the best investment decisions for your business and why?
- There are many ways to invest money. Jaleel wonders what are the investment options he can choose from. Choose three asset classes from the list below and help Jaleel to have a closer look at each of them. You are expected to explain the unique characteristics of the asset class, their associated risks and potential returns. For each asset class, you should use one or two examples to support your explanation. Asset Class Characteristics Risk Potential Returns Example Cash Products Fixed Income Equities Currencies DerivativesOpportunity cost is best defined as ☐ a. the opportunity to earn a profit that is greater than the one currently being made. ○ b. the amount that is given up when choosing an activity that is not as good as the next best alternative. ○ c. the amount given up when choosing one activity over the next best alternative. ○ d. the amount given up when choosing one activity over all other alternatives.Cost Planning; The Cost of an MBA; Time Value of MoneyThe motivation for getting the MBA degree has many aspects—the prestige, greater opportunity for promotion, change of occupation, and increase in pay. To focus just on this last motivation, suppose that you are interested in getting an MBA and are studying the various programs in the United States. You want to balance the costs of getting the degree against the future benefits in increase of pay. You have information on the cost of two MBA programs, which includes the costs of tuition, living expenses, and forgone pre-MBA salary for the two years you are in the MBA program. School A has an average cost of $100,000, and school B, a far more prestigious school at which you think your grades would qualify you to be a suc-cessful applicant, has a cost of $250,000. RequiredAssume that you have a 10-year planning horizon, that the difference in pay for a job after both schools would remain the same for all 10 years, and the relevant…
