Net present value method: Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method. Profitability index: Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund. The Profitability index is computed as follows: Profitability index = Total present value of net cash flow Amount to be invested To determine: The net present value and profitability index for the given proposals.

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Answer 1

Question

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

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Answer 2

Question

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

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Answer 4

Question

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

Answer 6

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

Answer 7

Chapter 12, Problem 12.3DI

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

Profitability index:

Profitability index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals and limited fund.

The Profitability index is computed as follows:

Profitability index =Total present value of net cash flowAmount to be invested

To determine: The net present value and profitability index for the given proposals.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4Q Ch. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q

Solution Summary: The author explains Net present value method, which compares the initial cash outflow of investment with the current value of its cash inflows. Profitability index is a technique used to rank the proposals of the business.

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