Net Present Value decision technique may not be the only pertinent munit of measure if the firm is facing time or resource constraints such as Hard Capital Rationing
The net present value decision technique may not be the only permanent unit of measure if...
The decision rule for net present value declares that a project is acceptable if
Which of the following statements are correct about the decision rules for net present value (NPV) and Profitability Index (PT) A) They always result in the same decision O B) They may result in different decisions C) NPV is always greater than PH D) a and E) b and
Which of the following statements are correct about the decision rules for net present value (NPV) and Profitability Index (PT) A) They always result in the same decision O B) They may result in different decisions C) NPV is always greater than PH D) a and E) b and
Which one of the following statements is correct? a) The net present value is a measure of profits expressed in today's dollars. b) The net present value is positive when the required return exceeds the internal rate of return. c) If the initial cost of a project is increased, the net present value of that project will also increase. d) Net present value is equal to an investment's cash inflows discounted to today's dollars.
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $600,000. The project is expected to generate the following net cash flows: Cash Flow Year Year 1 $300,000 $500,000 $425,000 $475,000...
Net Present Value and Other Investment Rules Describe how net present value is used in the financial decision-making process. Explain the disadvantages of using the payback method. Compare and contrast the internal rate of return (IRR) method from the net present value method (NPV).
12-25 net present value analysis of a lease or buy decision
Problem 12-25 Net Present Value Analysis of a Lease or Buy Decision (L012-2] The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company...
A financial decision should be pursued when A. the net present value is negative. B. the net present value is positive. C. the interest rate falls. D. the interest rate rises. The nominal interest rate approximately equals which of the following? A. the real interest rate minus the inflation rate B. the real interest rate plus the growth rate of real GDP C. the real interest rate minus the growth rate of real GDP D. the real interest rate plus...
Describe how net present value is used in the financial decision making process. Explain the disadvantages of using the payback method.
Understanding what the net present value (NPV) tells us. The NPV decision rule says to accept the project if the NPV is greater than zero. You perform a thorough capital budgeting analysis on a project that requires a $1,000,000,000 initial investment and calculate the net present value (NPV) as $1. Following the rule, you tell your boss she should accept the project. She laughs and says “do you think I would really invest $1,000,000,000 for a measly $1 NPV? You...