Select the incorrect statement regarding postaudits of capital investment decisions.
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- Help Save a Select the Incorrect statement regarding postaudlts of capital Investment decislons. Multiple Choice A postaudit should be conducted at the end of the project. The postaudit helps management determine whether a project that had been accepted should have been rejected. A postaudit is only necessary for a capital investment selected using a technique that does not consider the time value of money. The goal ofa postaudit is to provide feedback that can be used to improve the accuracy of future capital investment decisions.Ignoring differences in the useful lives of investments when evaluating capital expenditure alternatives A B с D cannot be addressed by adjusting cash flow assumptions of the proposals can distort present value analysis and adversely affect decisions will never distort present value analysis or adversely affect decisions reduces complexity and improves decision makingWhy should the financial manager include opportunity cost but ignore sunk costs when evaluating a proposed capital investments? Give an example of each.
- Critically assess how a failed capital project may also shape the future strategy of investment capital.Which of the following statement is true? O a. Sunk cost is not relevant in capital budgeting decision O b. Capital budgeting decisions are based on past OC. Capital budgeting decisions are short term in nature O d. Capital Budgeting decisions can be changed anytimePreviously posted, but Excel calculations are incorrect. MT480M4-4: Assess investment options based upon cost of capital and expected returns. The assessment requires the application of the net present value (NPV) model to assess investment options given cost of capital, commonly referred to as discount rates, and required rates of returns. You will explain the role of a discount rate in evaluating the NPV model and compare investment options as cost of capital increases or decreases. The use of a financial calculator and/or Excel will be required for this part of the assessment. Read the scenario and address all of the checklist items. Scenario: A new product manager presents to you, the chief financial officer, a proposal to expand operations that includes the purchase of a new machine. The product manager is certain that the positive cash flows, which exceed the initial outlay by $20,000 by the end of Year 4, will bring both praise and approval. You explain the company uses a…
- 1. State the advantages and disadvantages of each capital investment appraisal method b. Calculate the risk and return presented by the Fastcoat and Speedscreen options and a recommendation as to which option should be chosen, given the lack of investment capital available to the companySelect the incorrect statement concerning the internal rate of return (IRR) method of evaluating capital projects. Multiple Choice A project whose IRR is more than the cost of capital should be rejected. The higher the IRR the better. The internal rate of return is that rate that makes the net present value equal to zero. If a project has a positive net present value then its IRR will exceed the hurdle rate.Question 1 Which of the following statements is False regarding the payback period method: OA. Use as a tool in making screening decision. OB. The Cash flows after the payback period are ignored. OC. Shorter payback period indicates a more profitable project. O D. Consider the time value of money.
- MT480M4-4: Assess investment options based upon cost of capital and expected returns. The assessment requires the application of the net present value (NPV) model to assess investment options given cost of capital, commonly referred to as discount rates, and required rates of returns. You will explain the role of a discount rate in evaluating the NPV model and compare investment options as cost of capital increases or decreases. The use of a financial calculator and/or Excel will be required for this part of the assessment. Read the scenario and address all of the checklist items. Scenario: A new product manager presents to you, the chief financial officer, a proposal to expand operations that includes the purchase of a new machine. The product manager is certain that the positive cash flows, which exceed the initial outlay by $20,000 by the end of Year 4, will bring both praise and approval. You explain the company uses a 12% discount rate for cash flows and project-related budgeting.…22. If a capital budgeting project’s cash flows are not normal, the internal rate of return (IRR) method should be used to make the investment decision. Group of answer choices True FalseSuppose a company uses the NPV method, alongwith risk-adjusted WACCs, to calculate projectNPVs. However, it has not been considering realoptions in its capital budgeting decisions. Nowsuppose the company changes its capital budgeting process to take account of four types of realoptions investment timing, flexibility, growth,and abandonment. Would this decision be likelyto affect some of the calculated NPVs? Explainyour answer