Which of the following statements Is false with respect to the simple rate of return? Multiple Choice The annual Incremental net operating Income Included In the numerator should Include the incremental revenues that result from making the Investment The Initial Investment Included in the denominator should Include the cash outlay associated with that Investment. The Initial Investment Included In the denominator should be reduced by the salvage value of the new equlpment.

Which of the following statements Is false with respect to the simple rate of return? Multiple Choice The annual Incremental net operating Income Included In the numerator should Include the incremental revenues that result from making the Investment The Initial Investment Included in the denominator should Include the cash outlay associated with that Investment. The Initial Investment Included In the denominator should be reduced by the salvage value of the new equlpment.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...

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This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value method
Which of the following statements is true about the internal rate of return? a. It is the interest rate that sets a project's net present value at zero. b. It is the minimal acceptable interest rate on an investment. c. It is the difference between the present value of the cash inflows and outflows associated with a project. d. It is the difference between the present value of a cash outflow and the depreciation associated with an asset.
The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False
Discounting an investment’s cash flows using the internal rate of return will result in which of the following? Group of answer choices net present value of one net present value of zero positive net present value negative net present value
The internal rate of return measures the: Select one: a. discount rate that the firm uses in computing the cost of capital b. number of years to recover the original investment c. discount rate at which the net present value is zero d. discounted future cash flows
You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. If the discount rate decreases the it would lower the calculated value of the investment. Group of answer choices True False
Which one of the following statements is correct? If the initial cost of a project is increased, the net present value of that project will also increase. The net present value is positive when the required return exceeds the internal rate of return. If the internal rate of return equals the required return, the net present value will equal zero. Net present value is equal to an investment's cash inflows discounted to today's dollars.
Select the Incorrect statement concerning the present value Index (PVI). Multiple Choice The PVI is computed by dividing the total present value of the cash inflows by the present value of the cash outflows. The PVI should be used to evaluate two or more projects whose initial investments differ. The lower the PVI, the better. A project whose PVI is positive will also have a positive net present value.
What is the 'golden rule' for finding the Internal Rate of Return (IRR) of an investment project cash flow? a)Vary the discount rate until the net present value of the cash flow equals zero. b)Vary the discount rate until the net present value of the cash flow is positive c)Vary the discount rate to the point of maximum increase in the net present value d)Vary the discount rate until the net present value of the cash is negative
This 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
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.