The following table contains information about four projects in which Morales Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project. E(Click the icon to view the projects information.) Requirements 1. Rank the four projects in order of preference by using the C. internal rate of return. a. net present value. d. payback period. 2. Which method(s) do you think is best for evaluating capital investment projects in general? Why? b. project profitability index. e. accounting rate of return. Requirement 1. Rank the projects in order of preference. (a) (b) (c) (d) (e) Net Present Profitability Internal Rate Payback Accounting Rate Value Index of Return Period of Return 1st preferred C 2nd preferred C 3rd preferred C 4th preferred B

The following table contains information about four projects in which Morales Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project. E(Click the icon to view the projects information.) Requirements 1. Rank the four projects in order of preference by using the C. internal rate of return. a. net present value. d. payback period. 2. Which method(s) do you think is best for evaluating capital investment projects in general? Why? b. project profitability index. e. accounting rate of return. Requirement 1. Rank the projects in order of preference. (a) (b) (c) (d) (e) Net Present Profitability Internal Rate Payback Accounting Rate Value Index of Return Period of Return 1st preferred C 2nd preferred C 3rd preferred C 4th preferred B

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

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.

Question

The following table contains information about four projects in which Morales Corporation has the opportunity to invest. This
information is based on estimates that different managers have prepared about their potential project.
E (Click the icon to view the projects information.)
Requirements
1. Rank the four projects in order of preference by using the
a. net present value.
d. payback period.
2. Which method(s) do you think is best for evaluating capital investment projects in general? Why?
c. internal rate of return.
b. project profitability index.
e. accounting rate of return.
Requirement 1. Rank the projects in order of preference.
(a)
(b)
(c)
(d)
(e)
Net Present
Profitability
Internal Rate
Payback
Accounting Rate
Value
Index
of Return
Period
of Return
1st preferred
A
C
2nd preferred
3rd preferred
C
4th preferred
ADB
D AB

Data Table
Payback Accounting
Rate of
Return
Net
Internal
Period in
Profitability
Index
Investment
Present
Life of
Rate of
Project
Required
Value
Project
Return
Years
Project A..... $
210,000 $ 37,176
5.
21%
1.18
2.92
20%
Project B
420,000 $
25,684
22%
1.06
3.13
15%
Project C
$ 1,025,000 $ 133,942
17%
1.13
2.20
13%
Project D..... $ 1,510,000 $ 59,150
12%
1.04
3.05
21%
Print
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Which of the following best describes the process of capital budgeting? a Forecasting revenues and expenses hmiting funds for capital improvements without considering the profitability of proposed prot determining a companys short term goals d. determinung the amount to spend on fixed assets and which fixed assets to purchase
Select all of the following that managers can use to evaluate capital invesments. (Select all that apply.) High-Low Method Net present value method LIFO Method Internal rate of return method FIFO Method Annual rate of return Cash payback technique Depreciation method
1- Define capital budgeting Accoutering to Charles T. Hrongreen. 2- Name and describe METHODS OF CAPITAL BUDGETING OF EVALUATION. 3-Define Working Capital According to the definition of Weston and Brigham
Which of the following is a method of evaluating projects by first analyzing the project under all-equity financing and then adding in the effects of debt-financing? Multiple Choice Adjusted present value. Net present value. Pure play approach. Equity-debt approach. Modified IRR.
The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm’s strategic goals. Companies often use several methods to evaluate the project’s cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. The discounted payback period improves on the regular payback period by accounting for the time value of money. Managers have been slow to adopt the IRR, because percentage returns are a harder concept for them to grasp. For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR. True or False: Sophisticated firms use only the NPV method in capital budgeting decisions.…
explain that when developing a working capital policy, the entrepreneur determines the joint impact of the level of working capital investment and financing on profitability and risk,and Compare the three alternative working capital policies. Which policy would you consider implementing should you want a venture to show a higher expected profitability?
Explain the conditions under which a company’s WACC is appropriate to use as the cost of capital when evaluating the company’s projects.
Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis? a. future value index b. price-level index c. rate of investment index d. present value index
• What are the most commonly used primary investment criteria. Click all that apply NPV Capital Budgeting TVM IRR
10.-From the following options, choose the four that correspond to the application of financial management in the long term. A) Preparing financial reports B) Long-term investments C) Manage working capital D) Capital structure E) Support in identifying SWOT F) Budgeting G) Financial strategy (Class excercise)
A) Calculate the Return on Investment (ROI) for each of the portfolio. B) Based on the required rate of return, determine the Residual Income (RI)for each of the portfolio. C) If King Bhd is to choose only ONE (1) portfolio to invest in, advise the management team based of your answer in (a). Please provide a calculation for each of them.
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