Question

1.What is the limitation of using the net present value for evaluating capital investment alternatives?

a. Ignores the time value of money

b. Does not consider cash flows

c. Cannot be used to compare projects of different size

d. All of the above are limitations of the net present value method.

2.Which of the following is NOT part of the capital budgeting process?

a.Project identification |
||

b.Project evaluation |
||

c.Project monitoring |
||

d.All of the above are parts of the capital budgeting process. |

Answer #1

Hi

Let me know in case you face any issue:

1) Capital budgeting is the process of analyzing potential
projects. What does net present value (NPV) represent in capital
budgeting analysis? How does NPV compare to internal rate of return
(IRR); specifically, what makes them similar and different? What
functional flaw exists in the discounted payback period calculation
that makes this capital budgeting tool suspect?

Which of the following best explains why the net present value
method of capital budgeting is preferred over the internal
rate−of−return method?
.
the net present value method is expressed as a percentage of
initial investment
B.
the calculation under the net present value method is easy as it
does not use time value of money
C.
the percentage return computed under the net present value
method is very easy to compare
D.
the net present values of individual projects...

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 Beta) that will require an
initial investment of $3,225,000. The project is expected to
generate the following net cash flows:
Year
Cash Flow
Year 1
$300,000
Year 2
$450,000
Year...

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 Happy Dog Soap Company is evaluating a proposed capital
budgeting project (project Beta) that will require an initial
investment of $3,225,000. The project is expected to generate the
following net cash flows:
Year
Cash Flow
Year 1
$375,000
Year 2
$425,000...

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 Black Sheep Broadcasting Company is evaluating a
proposed capital budgeting project (project Alpha) that will
require an initial investment of $450,000. The project is expected
to generate the following net cash flows:
Year
Cash Flow
Year 1
$275,000
Year 2
$500,000...

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 Happy Dog Soap Company is evaluating a proposed capital
budgeting project (project Alpha) that will require an initial
investment of $450,000. The project is expected to generate the
following net cash flows:
Year
Cash Flow
Year 1
$375,000
Year 2
$425,000...

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 Happy Dog Soap Company is evaluating a proposed capital
budgeting project (project Alpha) that will require an initial
investment of $400,000. The project is expected to generate the
following net cash flows:
Year
Cash Flow
Year 1
$375,000
Year 2
$400,000...

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 Blue Hamster Manufacturing Inc. is evaluating a proposed
capital budgeting project (project Beta) that will require an
initial investment of $2,750,000. The project is expected to
generate the following net cash flows:
Year
Cash Flow
Year 1
$325,000
Year 2
$475,000
Year...

2. 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 the case of Lumbering Ox Truckmakers:
Suppose Lumbering Ox Truckmakers is evaluating a proposed
capital budgeting project (project Alpha) that will require an
initial investment of $400,000. The project is expected to generate
the following net cash flows:
Year
Cash Flow
Year 1
$375,000...

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 Hungry Whale Electronics is evaluating a proposed
capital budgeting project (project Alpha) that will require an
initial investment of $400,000. The project is expected to generate
the following net cash flows:
Year
Cash Flow
Year 1
$325,000
Year 2
$400,000
Year 3...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 12 minutes ago

asked 25 minutes ago

asked 39 minutes ago

asked 45 minutes ago

asked 54 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago