The Net Present Value considers which of the following inputs: The internal rate of return The accounting rate of return The initial amount investment The annual accounting profit throughout the project’s operating life.

The Net Present Value considers which of the following inputs: The internal rate of return The accounting rate of return The initial amount investment The annual accounting profit throughout the project’s operating life.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 5MC

See similar textbooks

Related questions

Q: d) Determine the total Annual Worth for the Project e) What is the Present worth of this project

A: Interest Rate = 10℅ Year Cash Flows Reference 0 -6,500,000.00 First Cost 1 -24,000.00 Annual…

Q: Calculate the Payback Period of Project A (expressed in years, months and days). 2. Calculate the…

A: The payback period is used for project evaluation as it calculates the time required by the cash…

Q: Calculate the following for each of the projects. I Net present value II. Profitability Index III…

A: Net present value (NPV) is the difference between the present value of cash inflows and the present…

Q: How the regular payback periods and discounted payback periods for projects are calculated, after…

A: Pay back period As name itself indicates that pay back period means that how much time required to…

Q: a) A) Calculate the net present value of the investment. Please interpret with the reasons whether…

A: Net present value is present value of future cash flows.

Q: The Modified Internal Rate of Return (MIRR) is based on : Reinvestment rate, financing rate, and the…

A: MIRR is a discounting rate that compares the present value of future cash inflows to zero year…

Q: What refers to the interest rate at which the present work of the cash flow on a project is zero of…

A: The RoR can be used with any asset that was purchased at some point in the past and will provide…

Q: How can the money released from a project be reinvested to yield a rate of return equal to that…

A: A rate of return can provide brokers and investors key data for future trades or investments. The…

Q: The net present value of a capital budgeting project is ________. The difference between the…

A: The present value factor is considered as one of the important techniques which are used by the…

Q: The internal rate of return method assumes that a project's cash flows are reinvested at the:

A: The internal rate of return is a financial analysis tool that is used to estimate the profitability…

Q: Calculate the Payback Period of Project A (expressed in years, months and days).

A: Solution:- Payback period means the period at which the summation of cash flows from a project are…

Q: What is the Net Present Value (NPV) of the yearly (annual) capital budgeting cost?

A: While choosing which investment project will be undertaken, different appraisal techniques are used.…

Q: This method solves for the interest rate that equates the equivalent worth of a project's cash…

A: Payback period - Initial investment / Cash flow per year. It is the period taken to recover the…

Q: Explain why net operating working capital is included in a capital budgeting analysis andhow it is…

A: The net operating working capital is included in a capital budgeting analysis andrecovered at the…

Q: The internal rate of return (IRR) on a project is the average annual rate of return provided by…

A: The internal rate of return also known as IRR is a key tool in evaluating projects and is vital for…

Q: This refers to the sum of project’s first cost and the present worth of all costs for replacement,…

A: Explanation and answer is given below,

Q: A. Assuming cash flows arise evenly throughout the year, calculate the payback period of each of the…

A: Long-term investment decisions are known as capital budgeting. The company needs to allocate its…

Q: If the net present value of a project is positive, the project earns a return that is Group of…

A: Introduction: According to the net present value rule, executives and shareholders must only invest…

Q: Compute the NPV statistic for Project U given the following cash flows if the appropriate cost of…

A: The present value of a given cash flow: The present value of a given cash flow, at a specified rate…

Q: Are the revenues from the goods and services produced in the new facility, the expected future cash…

A: The question is based on the concept of calculation and components of cash inflows from new long…

Q: A project has the following cash flows. What is the payback period? Year Cash Flow 0…

A: The payback period is firmly identified with the earn back the original investment point of any…

Q: What is the net present value of a project with the following cash flows and a required return of…

A: NPV is the sum of present value of future cashflows PV = cashflow/(1+rate)^year

Q: Illustrate the conventional payback period, annual project cash flow over the life of project, and…

A: The illustration is shown below:

Q: Determine investment flows, annual operation and recovery.

A: The net annual cash flow is computed by deducting the out-of-pocket and other operating expenses…

Q: Explain how to find the value of a capital budgeting project given its cost, its expected annualnet…

A: Capital budgeting is a method of analyzing the investment decision which is supposed to be taken by…

Q: Assuming that a project has already been evaluated using the following techniques, the evaluation…

A: There will be no effect on change in residual value of project, if the payback period is less than…

Q: calculate the period cashflow,

A: Note: The project's quarterly cash flow has been computed below. The present value and net present…

Q: How can we measure the true rate of return of any internal portion of an investment project?

A: True rate of return means real rate of return on investment. It is the actual return earned on an…

Q: A project's return is referred to as the yield promised by an im·cstment project over its useful…

A: Yes, the project return is referred to as the yield assured by the investment project over project’s…

Q: In the estimation of incremental cash flows for a new project, several costs and issues are…

A: ICF stands for Incremental cash flow is defined as the cash flow which is attained through company…

Q: 8- Which of the following methods of capital budgeting uses the average annual profits for…

A: In the given question we need to choose the correct option from the following given options.

Q: To calculate net present value of a project with normal cash flows, find the present value of the…

A: To calculate net present value of a project with normal cash flows, find the present value of the…

Q: The equivalent annual net benefit of this project.

A: Equivalent annual benefit is calculated by present value of annuity formula, where the present value…

Q: Calculate internal Rate of Return of the project. Should the project be accepted? If reinvestment…

A: Internal rate of return is the rate at which the present value of cash inflows are equal to present…

Q: The capital budgeting decision that requires a choice between two decisions is a(n) _______ project.…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: When evaluating a project with non-normal cash flows (cash flows change sign for at least two times…

A: The internal rate of return method is a advancement upon internal rate of return method which will…

Q: Calculate the IRR of the project to assess whether it should be undertaken.

A: IRR is the discount rate that makes the Net Present Value of a project zero. Now we will follow…

Q: Calculate operating cash flows. Calculate the payback period for each project to Calculate the net…

A: Operating cash flow :— It is the amount of annual cash inflow of the project. Payback period :—…

Q: In the payback method, depreciation is added back to net operating income when computing the annual…

A: The payback period alludes to the measure of time it takes to recoup the cost of an investment.…

Q: A project has cash flows of -$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively.…

A: Year Cash flow 0 -152000 1 60800 2 62300 3 75000 Required rate of return = 13%

Q: Which of the following statements is true about the internal rate of return? a. It is the…

A: The internal rate of return is a financial measure used to measure the attractiveness of a…

Q: The length of time required to cover the initial outlay of the investment in a project is referred…

A: There are different methods of capital budgeting which help a manager take decision regarding the…

Q: The periodic cash flows associated with an investment project include which of the following O…

A: solution concept periodic cash flow The term cash flow means the cash flow which arises every period…

Q: project, respectively. What amount should be included in the project analysis cash flows for net…

A: Working Capital: It is the amount needed to run the daily operations of the business. By reducing…

Q: What is the formula for calculating present value of a project? If you are given annual profit in…

A: The net present value (NPV) is a capital budgeting tool that is used to determine the profitability…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

The Net Present Value considers which of the following inputs:

The internal rate of return

The accounting rate of return

The initial amount investment

The annual accounting profit throughout the project’s operating life.

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Does the accrual accounting rate-of-return method consider income earned throughout a project's expected useful life?
This refers to the sum of project’s first cost and the present worth of all costs for replacement, operation and maintenance for a long time or forever. a. Rate of return on additional investment b. Annual cost c. Capitalized cost d. Present worth cost
Required information Problem 24-2A (Algo) Payback period, accounting rate of return, net present value, and net cash flow calculation LO P1, P2, P3 [The following information applies to the questions displayed below.] Project Y requires a $306,000 investment for new machinery with a six-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 370,000 165,760 51,000 26,000 $ 127,240
Using attached, Accounting Rate of Return on average investment of Project A (expressed to twodecimal places).
Which of the following methods of capital budgeting uses the average annual profits for evaluation of projects? a. Accounting Rate of return b. Internal rate of return c. Net present value d. Payback period
Calculate the total required rate of return - in nominal terms – for the investment. Calculate the total required rate of return - in real terms – for the investment.
Which of the following methods of capital budgeting indicates the time period required to recover the investment? a. Internal rate of return b. Accounting Rate of return c. Payback period d. Net present value
Calculate the accounting rate of return for project A and B.
What is the process of computing the required annual savings to cover the capital and operating costs?
The length of time required to cover the initial outlay of the investment in a project is referred to as the A. payback period. B. internal rate of return. C. net present value period. D. discounted payback period.
Compute for the following: 1. Accounting rate or return based on the average investment 2. Net Present Value 3. Traditional Payback Period
Calculate the project cash flows for each year. Based on these cash flows and the average project cost of capital, what are the projects NPV, IRR, MIRR, PI, payback, and discounted payback? Do these indicators suggest that the project should be undertaken?