Considering the unequal investments, which of the following techniques would be most approprlate for choosing between Investment A and Investment B?
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- Please answer the following question. In this method, the company compares the amount spent on the investment with the discounted expected future cash inflows. a.Payback b.NRV c.Investment d.IRRExplain how the NPV investment appraisal method can be applied in situations where capital is rationed. Discuss the reasons why capital rationing may arise Discuss the meaning of the term “relevant cash flow” in the context of investment appraisal, giving examples to illustrate your discussion.Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.
- How would you classify dividends from investments on a cash budget? a. Cash brought forward b. Payment c. Receipt d. Opening balance When comparing mutually exclusive alternatives that have different lives by the present worth method, it is necessary to: a. Always compare them over a time period of equal service b. Find the present worth over one life cycle of each alternative c. Always compare them over a period equal to the life of the shorter-lived alternative d. Always compare them over a period equal to the life of the longer-lived alternativeSelect all of the following that managers can use to evaluate capital invesments. (Select all that apply.) LIFO Method ONet present value method tions O Cash payback technique FIFO Method rces O Depreciation method O High-Low Method Internal rate of return method O Annual rate of returnchoose the coreect answer 1-Aconservative financing policy indicates that investment in fixed and current assets is funded by long-term sources of financing and this policy leads to a-Low risk of real and financial hardship – b-Low interest rates and apayment premium borne by the company 2- The payback period method in evaluating projects depends on extracting the time period required to cover the investment amount under this method a-we tuke only cashflows to cover the investment size b-we talk cash flows to cover with cash flows expected to be collected after the payback period 3- suppose you have a stock and this stock achieves a loss in half of the period of 20% and makes a profit in the other half of the period of 70% and therefore the expected rate of return per share will ER =25% ER=50% ER=65%
- Calculate the Following for the question: i) NPV of investment i-a) Based on above NPV, is IRR higher or lower than 6% ii) IRR for the investment iii) Determine simple payback period using iii-a) before-tax cash flows iii-b) After-tax cash flows iv) Determine discounted payback period using after tax cash flows v) Find ARR vi) Calcualte profitability index for the investmentFinancial assets management decision-making often involves determination of the Present Value (PV) of the flow of money over time. If a monetary PV is given by: PV = Gt/(1+m)t (i) Identify and explain each of the variables: G, m, and t. (ii) Explain how an increase in m would impact the PV of this financial asset. (iii) Find how much would be required to generate a PV of 890, over a 5 years period, at a constant annual interest rate of 4 percent.According to assigned videos, which of these is representative of aggressive asset allocation? a. Most or all of the money invested in equities. b. Most or all of the money invested in cash. c. Even 50-50 split between equities and fixed-income securities. d. Most or all of the money invested in fixed-income securities.
- Which of the following statements are correct? Preferred equities are separate form common equities Opportunity cost should not be included in the capital budgeting decision Retained earnings are important in calculating the WACC Weights for equity in the WACC calculation are always on book values Cash from net working capital for each year is defined as NWCn- NWCn-1The funds invested in current assets are termed as Select one: a. long term assets b. Short term loans c. None of the options d. Net Working Capital e. Short-term liabilitiesThis calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero. Group of answer choices A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method