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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method. To calculate: The net present value of the investment.

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Answer 1

Question

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

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Answer 2

Question

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Answer 6

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

Answer 7

Chapter 26, Problem 26.3APE

(1)

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 determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To calculate: The net present value of the investment.

Answer 8

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Answer 9

(2)

To determine

Present value index:

Present value 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 present value index is computed as follows:

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

To calculate: The present value index of the investment.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 26 - What are the principal objections to the use of...Ch. 26 - Discuss the principal limitations of the cash...Ch. 26 - Prob. 3DQ Ch. 26 - Your boss has suggested that a one-year payback...Ch. 26 - Prob. 5DQ Ch. 26 - Prob. 6DQ Ch. 26 - A net present value analysis used to evaluate a...Ch. 26 - Two projects haw an identical net present value of...Ch. 26 - Prob. 9DQ Ch. 26 - What are the major disadvantages of the use of the...

Solution Summary: The author explains the net present value method, which is used to compare the initial cash outflow of investment with the current value of its cash inflows.

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