Which of the following statements is (are) true about project appraisal methods: (i) NPV is the best measure for project appraisal even when capital is rationed. (ii) IRR measures percentage returns of an investment rather than added value. (iii) Contrary to real options, NPV assumes a now or never decision to invest

Q: Is the net-investment test the only way to accurately predict projectborrowing?

A: Net investment refers to the total amount of money that a company invests in capital assets which is…

Q: Which of the following statements regarding capital budgeting analysis is correct?     NPV assumes…

A: Capital budgeting is the process of making investment decisions by a company in which different…

Q: How can we use the internal rate of return to evaluate whether we should pursue a specific project?…

A: It is important for the investors to evaluate the project in all aspects before making any…

Q: Which of the following cash flows should not be considered when evaluating a project? Changes in…

A: Following cashflows should not be considered when evaluating a project-

Q: Capital Asset Pricing Model is based on certain assumptions, which have been criticized after…

A: Asset pricing is a linear function of the beta value of market return: When the market returns…

Q: Which of the following contributes positively to the value of a real option to delay investment?…

A: Real option:A real option is a selection made open to a firm's managers on prospects for business…

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: To estimate project value, FCF should be computed at

A: Step 1 The income that an organization receives after a cash outflow is called a free cash flow. It…

Q: Suppose a company uses the NPV method, alongwith risk-adjusted WACCs, to calculate projectNPVs.…

A: Companies find NPV to know the present worth of the project and on that basis, they decide to go for…

Q: Check all that apply: Owhen IRR is positive, the project is acceptable when profitability index is…

A: IRR is the internal rate of return at which present value of cash flow is equal to initial…

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

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: 1. Simulation analysts uses best- and worst case scenarios to determine the most likely outcome 2.…

A: The first statement is false. Simulation analysts use best- and worst-case scenarios to understand…

Q: One of the following methods are not a method to evaluate projects: Return on investment Discounted…

A: Capital budgeting: It implies to the process of evaluating different projects based on their…

Q: Option values are extinguished when they areexercised. How does this influence capital budgeting…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A disadvantage of using the payback period to compare investmentalternatives is that it;

A: Payback period: The payback period is the time period required to recover the initial investment of…

Q: True or false? One way to address risk for a capital budgeting problem is to conduct scenario…

A: Capital budgeting plays a pivotal role in determining the feasibility and profitability of long-term…

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: Which of the following is not a method for incorporating risk analysis into capital budgeting?   a.…

A: Capital budgeting is a process of evaluating various investment proposals. The various capital…

Q: For a capital investment project to be acceptable, it must generate a rate of return: O Less than…

A: Company raises money from the market through debt and equity and each one has cost related to that…

Q: what does it mean if the npv and irr are both negative quora, should the company invest in the…

A: Capital Budgeting entails long-term planning and monitoring of capital expenditures, as well as a…

Q: Consider the following statement: In a capital rationing problem withdivisible investments, if all…

A: Capital rationing is a technique used in capital budgeting to maximize profitability by restricting…

Q: When evaluating projects using internal rate of return,?  A. projects having lower early-year cash…

A: Internal rate of return is the rate of return at which the net present value is equal to zero.…

Q: For a typical project evaluation with initial investment at time=0 and positive cash flows…

A: Net Present Value is used to analyze the profitability of a projected investment and it is defined…

Q: Select the Incorrect statement concerning the present value index (PVI). Multiple Choice The PVI is…

A: Present value index or profitability index :-  It is ratio of total present value of cash inflows to…

Q: Calculating the payback time is the most precise technique to determine the profitability of an…

A: Payback technique helps us to compute the time period in which the project's cash inflows cover the…

Q: What should a manager do with a project that has two internal rates of return (IRRs)? O a. Do the…

A: IRR, or Internal Rate of Return, is a financial metric used to determine the profitability of an…

Q: Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a…

A: Capital investment is defined as an amount, which used to get invested in the corporation for…

Q: According to the Capital Asset Pricing Model, higher investment risk, however it is measured,…

A: The CAPM model is being used for finding the required rates of returns of the security for given…

Q: Traditional NPV analysis usually does not address the decisions that managers have after a project…

A: Capital budgeting techniques are used to determine whether the investment is profitable or viable.…

Q: Payback period is one of the nondiscounting models used in capital investment decisions.  What are…

A: Payback period refers to the period in which the initial investment is recovered.

Q: Which of the above statements are correct?

A: Net Present Value: It is the present value of the annual cash flows and the initial cost of the…

Q: Explain why the NPV is a more accurate measure than IRR when evaluating the financial profitability…

A: Net Present Value (NPV) and Internal Rate of Return (IRR) are two popular methods used in financial…

Q: Mr. Tim, the recently hired manager for this potential project is not convinced that using the IRR…

A: An indicator of the financial attractiveness of an investment is the modified internal rate of…

Q: Which of the following statements is false? The NPV and IRR always provide the same accept/reject…

A: The IRR is the rate of return at which the present value of the future cash flows is equal to the…

Q: Consider the following two statements concerning risk analysis: 1. Sensitivity analysis provides…

A: Risk analysis is referred as the process of analyzing as well as identifying the potential issues,…

Q: Why is the net-investment test the only way to accurately predict projectborrowing? Explain with an…

A: Definition: Net- investment measures the company's assets and investment like property, software,…

Q: When the present value of the cash inflows exceeds the initial cost of a project, then the project…

A: If present value of cash inflows exceeds the initial cost of a project, then NPV of the project will…

Q: Ranking conflicts (or conflicts in project choice) can arise between IRR and NPV decision rules when…

A: IRR is the actual rate of return expected from the investment or project. Whereas the NPV means the…

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.