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While determining the appropriate discount rate, if a firm uses a weighted average cost of capital that is unique to a particular project, it is using the Blank______.
pure play approach
economic value added method
subjective approach
security market line approach
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- Which one of the following methods predicts the amount by which the market value of a firm will change if a project is accepted? Multiple Choice Internal rate of return Payback Net present value Profitability index Discounted paybackHelp plsThe economic value added (EVA) is a performance measure based on the Blank______. Multiple choice question. risk-free rate weighted average cost of capital cost of equity expected return
- The difference between an investment's market value and its cost is known as its Blank______. Multiple choice question. net present value internal rate of return profitability index payback periodThe Capital Asset Pricing Model (CAPM). Write the financial model assumptions, equations, descriptions and financial meaning of each parameters and / or variables, and critique of the model and any idea to improve the modelCapital investment evaluation methods can be grouped into which of the following two general categories? a. Methods that use average rate of return and methods that use differential analysis b. Methods that do not use variable costing and methods that use variable costing Oc. Methods that do not use present values and methods that use present values Od. Methods that use absorption costing analysis and methods that use incremental analysis
- When estimating a weighted average cost of capital, a firm can use either book values or market values for estimating the value of the component sources of capital. Where would you find book values, and what value do they represent? How would you calculate market values? In general, would you prefer to use market or book values for estimating the WACC? Under what circumstances would you use book values?Which two types of investment criteria are most frequently used by managers today? Multiple Choice O O O O Internal rate of return and net present value Net present value and profitability index Net present value and payback Internal rate of return and payback Average accounting return and internal rate of return DTrue or false: The basic assumption of using weighted average cost of capital (WACC) to discount a project is that the capital has been raised in optimal proportions. True false question. True False
- Methods that ignore the time value of money in capital investment appraisal include which of the following? a. Net present valueb. Discounted payback c. Average rate of return d. All of the aboveConsider the relationship between a project’s net present value (NPV), its internal rate of return (IRR), and a company’s cost of capital. For each scenario that follows, indicate the relative value of the unknown. If cost of capital is unknown, indicate whether it would be higher or lower than the stated IRR. If NPV is unknown, indicate whether it would be higher or lower than zero. Project 1 is shown as an example.__________ considers the impact of changing one or more inputs or assumptions on the resulting answer (output) of an analysis. a.Sensitivity analysis b.Capital rationing c.Expected value analysis d.The net present value method
