Should financial managers accept all projects that have a positive net return? Why or why not?
Should financial managers accept all projects that have a positive net return? Why or why not?
Homework Answers
YES, If the financial manager is very much keen on even one point of positive return.
NO, because positive return in the sense could be from 1$ to substantial amount. in this cases projects cannot be accepted as because there should be some minimal profit involved above the capital cost for the firms to perform consistently. Also it depends upon the investment size.
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Should financial managers accept all projects that have a
positive net return? Why or why not?
40. The decision rule for net present value is to: A) accept all projects with undiscounted...
40. The decision rule for net present value is to: A) accept all projects with undiscounted cash inflows exceeding the initial cost. B) reject all projects with rates of return exceeding the opportunity cost of capital. C) accept all projects with positive net present values D) the decision to accept or reject a project is solely at management's discretion QUESTION 41 41. The decision rule for internal rate of return is to: A) accept all projects with negative NPVs. B)...
Which of the following statements are correct? I. A positive net present value signals an accept...
Which of the following statements are correct? I. A positive net present value signals an accept decision. II. Projects should be accepted when the profitability index is greater than 1. III. A payback period that is less than the required period signals an accept decision. IV. When the internal rate of return exceeds the required return, a project should be accepted.
Projects with high financial leverage will have higher interest expenses and lower net income than projects...
Projects with high financial leverage will have higher interest expenses and lower net income than projects with low financial leverage, thus it ( high leverage project) always ends up with a lower return. Do you agree? Why?
Barr, Inc. has a 20% required rate of return. Three managers have presented three potential projects...
Barr, Inc. has a 20% required rate of return. Three managers have presented three potential projects to increase income over the next ten years, each with their preferred measure. Project A was reported to have an NPV of $(2,460). Project B was reported with an IRR of 28%. Project C was reported to have a payback period of 23 years. With which of these projects should Barr move forward? All three sound great! Project B Project C Project A
Narion, Inc. has a 20% required rate of return. Three managers have presented three potential projects...
Narion, Inc. has a 20% required rate of return. Three managers have presented three potential projects to increase income over the next ten years, each with their preferred measure. Project A was reported to have an NPV of $2,460. Project B was reported with an IRR of 18%. Project C was reported to have a payback period of 23 years. With which of these projects should Narion move forward? Project B All three sound great! Project C Project A
Which of the following statements is INCORRECT? Select one: a. For independent projects, the decision to...
Which of the following statements is INCORRECT? Select one: a. For independent projects, the decision to accept or reject will always be the same using either the MIRR method or the NPV method. b. The IRR method is appealing to some managers because it produces a rate of return upon which to base decisions rather than a dollar amount like the NPV method. c. One of the disadvantages of choosing between mutually exclusive projects on the basis of discounted payback...
Describe why financial managers should be concerned with quality initiatives in the healthcare organization.
Describe why financial managers should be concerned with quality initiatives in the healthcare organization.
If we have two independent projects: Project Astudent has a positive NPV of $25,000 and a...
If we have two independent projects: Project Astudent has a positive NPV of $25,000 and a Profitability Index (PI) of 1.1, while Project Gummie has an NPV of $12,000 and a Profitability Index (PI) of 1.6 then you should A) Accept only project Astudent because B) Accept only project Gummi because C) Accept both projects because D) Reject both projects becasue
Which one of the following projects should you accept? &nbs
Which one of the following projects should you accept? A project with an IRR of 12.7 percent and a required return of 13 percent. B. A project with an NPV of -$121.21. C. A project with a PI of 1.03. D. A project with an AAR of 13.8 percent and a required AAR of 14 percent.
You have been presented with 6 projects. All projects are 7-year projects. NPV Net present value....
You have been presented with 6 projects. All projects are 7-year projects. NPV Net present value. IRR = internal rate of return. MIRR = modified internal rate of return. PI profitability index. Project F ($18,539) Project G $23,725 Project C $3,327 Project D $8,876 Project B $11,041 Project A $52,715 NPV 18.13% 11.77% 15.24% 43.46% 30.18% 21.71% IRR= 15.84% 12.97% 24.83% 20.12% 14.36% 17.16% MIRR= 0.94 1.12 1.02 1.89 1.44 1.21 Pl- If all projects are independent, which project or...
40. The decision rule for net present value is to: A) accept all projects with undiscounted cash inflows exceeding the initial cost. B) reject all projects with rates of return exceeding the opportunity cost of capital. C) accept all projects with positive net present values D) the decision to accept or reject a project is solely at management's discretion QUESTION 41 41. The decision rule for internal rate of return is to: A) accept all projects with negative NPVs. B)...
You have been presented with 6 projects. All projects are 7-year projects. NPV Net present value. IRR = internal rate of return. MIRR = modified internal rate of return. PI profitability index. Project F ($18,539) Project G $23,725 Project C $3,327 Project D $8,876 Project B $11,041 Project A $52,715 NPV 18.13% 11.77% 15.24% 43.46% 30.18% 21.71% IRR= 15.84% 12.97% 24.83% 20.12% 14.36% 17.16% MIRR= 0.94 1.12 1.02 1.89 1.44 1.21 Pl- If all projects are independent, which project or...
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