We discussed two valuation models: discounted cash flow (DCF) and residual operating income (ROPI). Which valuation model - DCF and/or ROPI - uses forecasts of future amounts as a model input? O Both DCF and ROPI models O ROPI model only O Neither DCF nor ROPI model O DCF model only

We discussed two valuation models: discounted cash flow (DCF) and residual operating income (ROPI). Which valuation model - DCF and/or ROPI - uses forecasts of future amounts as a model input? O Both DCF and ROPI models O ROPI model only O Neither DCF nor ROPI model O DCF model only

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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#7 For context NPV is net present value, IRR is internal rate of return, and ARR is accounting rate of return 3 c Known Amt. ? ? Known Amt. ? Known Amounts What is this chart? What is this chart? What is this chart? What is this chart? ? Known Amounts Describe Compound Interest. What do we mean when we say "discounting"? What are the reasons for using the PVA table? How do NPV and IRR differ from Payback Period and ARR?
“Explain the reasons why the net present value (NPV) method of investment appraisal is likely to be more reliable than the accounting rate of return method (ARR).”
Bhagi
An advantage of the internal rate of return method is that a.it considers the time value of money. b.it can rank proposals of equal lives. c.it considers the cash flows of the investment. d.All of these choices are correct.
28)
b. Which method should be selected using net present value analysis? O Method 1 O Method 2 ONeither of these
Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions. a. the inclusion of opportunity costs b. erosion c. errors in projected cash flows d. the exclusion of sunk costs e. net working capital costs
Certainty Equivalent Cash flow (CEQ) is obtained through converting the expected cash flows by a ______ shift of risk. If we discount the CEQ by the time value of money, we will have the present value _______ discounting future cash flow by time and risk discounting factor. Therefore, CEQ is always ______ than the expected cash flow. Find the correct choice to fill the blanks. A. time varying, same as, lowerB. constant, same as, lower C. time varying, higher than, lowerD. constant, same as, higher
The discounted payback method considers the time value of money as well as the cash flows after the payback.Group of answer choices A.false B. true
The present value of an investment's future cash flows divided by its initial cost is the: O Net present value. O Internal rate of return. O Average accounting return. O Profitability index. O Payback period.
In a few sentences, answer the following question as completely as you can. Compare discounted cash flow (DCF) and non-discounted cash flow capital budgeting techniques. If you were to evaluate a project, which one of these techniques would you use?
This can occur when a selection among mutually exclusive alternatives is based wrongly on maximization of IRR on the total cash flow. O a. Investment errors O b. Ranking errors Ос. Incremental errors Od. Alternative errors

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