Homework Answers
Answer
Question 13
Sunk cost
Explanation
Sunk cost are the cost that are already been incurred in past and nothing we can do now to recover them,These cost won't affect the decision making .so we can completely ignore them while analyzing a project
why we can't ignore them:
-DISCOUNT RATE :we can not ignore discount rate while analyzing a project because it tells us about the expected rate of return from an investment
-COST OF CAPITAL: Cost of capital tells us that how much company expect on return so we can't ignore this
-OPPERTUNITY COST:
the loss of other alternatives when one alternative is chosen so can't ignore this
-SIDE EFFECT- while chosing a effect we have to be care full about its side effects because ignorance of side effects causes huge loss so we can't ignore this
Question 14
Answer
Pay back period
Explanation
As it's name indicate pay back period i.e the length of time required for an investment to recover its initial outlay in terms of profits
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Question 13 (1 point) Which one of the following can be completely ignored when analyzing a...
1. We can get multiple IRRS when we draw an NPV profile for a project when:...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Question 16 (1 point) Which of the following statements is correct? A) The regular payback is...
Question 16 (1 point) Which of the following statements is correct? A) The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. OB) The regular payback does not consider cash flows beyond the payback year, but discounted payback overcomes this defect. OC) The discounted payback method recognizes all cash flows over a project's life, and it also adjusts...
Question 47 (1 point) Which of the following characteristics do Crustacea and Hexapoda have in common?...
Question 47 (1 point) Which of the following characteristics do Crustacea and Hexapoda have in common? OA) They have completely abandoned gills for the more efficient tracheal system. OB) They have three pairs of walking legs. OC) Their head and thorax are fused into a cephalothorax. D) They have at least one pair of antennae, mandibles, and maxilla on their head. E) They have a similar number of marine, terrestrial, and freshwater species.
Question 1 (1 point) Company A has an internal cost of capital of 7% annually. It...
Question 1 (1 point) Company A has an internal cost of capital of 7% annually. It is evaluating its investment options against its internal costs and has identified three potential investments: Investment A: Bond with annual returns of 8% Investment B: Bond with annual returns of 4% Investment C: Bond with annual returns of 12% Which of the above investments should the company consider taking on given its internal cost of capital? O A only C only A and C...
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first...
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first cash flow is negative and the remaining cash flows are positive Projects are independent of one another. C) A project has more than one NPV. D) Projects are mutually exclusive. E) The profitability index is greater than one. The cash flows of a new project that come at the expense of a firm's existing projects are: A) Salvage value expenses. B) Net working capital...
Question 6 (1 point) Which of the following should NOT be considered when estimating FCF? 1)...
Question 6 (1 point) Which of the following should NOT be considered when estimating FCF? 1) Sunk cost. 2) Interest Expenses of debt financing. 3) Opportunity cost. 4) All of the above should not be considered. 5) Both a and b should not be considered.
Question 13 (1 point) Which of the following statements is correct? A) When calculating the cost...
Question 13 (1 point) Which of the following statements is correct? A) When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation. B) When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible for the corporation. OC) If a company's beta increases, this will increase the cost of equity, but never its WACC. D) Because of tax effects,...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A and B. Project A costs $60,000 and generates cash flows of $9,000 for 10 years. Project B costs $60,000 and generates cash flows of $2,000 for seven years and then cash flows of $27,000 for three years. Report rates in percentage form to two decimal places i.e. 10.03% not 10% Question 1 (3 points) Calculate what discount rate would make you indifferent between choosing...
Question 1 (1 point) The payback method of analysis ignores which one of the following? O...
Question 1 (1 point) The payback method of analysis ignores which one of the following? O 1) Cash flow direction 2) Timing of each cash inflow 3) Arbitrary cutoff point 4) Time value of money 5) Initial cost of an investment
With the improvement in the technology and understanding of discounting techniques, both the net present value...
With the improvement in the technology and understanding of discounting techniques, both the net present value (NPV) technique and internal rate of return (IRR) technique used in capital budgeting analyses have become more popular because these techniques provide decisions that help the firm to a. minimize its overall payback period b.maximize its value c. maximize the initial capital investment d. minimize the number of multiple IRRs computed for every project e.maximize it required rate of return QUESTION 10 Which of...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Question 16 (1 point) Which of the following statements is correct? A) The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. OB) The regular payback does not consider cash flows beyond the payback year, but discounted payback overcomes this defect. OC) The discounted payback method recognizes all cash flows over a project's life, and it also adjusts...
Question 47 (1 point) Which of the following characteristics do Crustacea and Hexapoda have in common? OA) They have completely abandoned gills for the more efficient tracheal system. OB) They have three pairs of walking legs. OC) Their head and thorax are fused into a cephalothorax. D) They have at least one pair of antennae, mandibles, and maxilla on their head. E) They have a similar number of marine, terrestrial, and freshwater species.
Question 1 (1 point) Company A has an internal cost of capital of 7% annually. It is evaluating its investment options against its internal costs and has identified three potential investments: Investment A: Bond with annual returns of 8% Investment B: Bond with annual returns of 4% Investment C: Bond with annual returns of 12% Which of the above investments should the company consider taking on given its internal cost of capital? O A only C only A and C...
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first cash flow is negative and the remaining cash flows are positive Projects are independent of one another. C) A project has more than one NPV. D) Projects are mutually exclusive. E) The profitability index is greater than one. The cash flows of a new project that come at the expense of a firm's existing projects are: A) Salvage value expenses. B) Net working capital...
Question 6 (1 point) Which of the following should NOT be considered when estimating FCF? 1) Sunk cost. 2) Interest Expenses of debt financing. 3) Opportunity cost. 4) All of the above should not be considered. 5) Both a and b should not be considered.
Question 13 (1 point) Which of the following statements is correct? A) When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation. B) When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible for the corporation. OC) If a company's beta increases, this will increase the cost of equity, but never its WACC. D) Because of tax effects,...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A and B. Project A costs $60,000 and generates cash flows of $9,000 for 10 years. Project B costs $60,000 and generates cash flows of $2,000 for seven years and then cash flows of $27,000 for three years. Report rates in percentage form to two decimal places i.e. 10.03% not 10% Question 1 (3 points) Calculate what discount rate would make you indifferent between choosing...
Question 1 (1 point) The payback method of analysis ignores which one of the following? O 1) Cash flow direction 2) Timing of each cash inflow 3) Arbitrary cutoff point 4) Time value of money 5) Initial cost of an investment
With the improvement in the technology and understanding of discounting techniques, both the net present value (NPV) technique and internal rate of return (IRR) technique used in capital budgeting analyses have become more popular because these techniques provide decisions that help the firm to a. minimize its overall payback period b.maximize its value c. maximize the initial capital investment d. minimize the number of multiple IRRs computed for every project e.maximize it required rate of return QUESTION 10 Which of...
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