Question

Which is the best technique for decision?

1. payback period

2. Discounted payback period

3. Net present value

4. profitability index

5. Internal rate of return

Answer #1

1) Explain the Cash Payback Technique.
2) Explain the two methods for determining the Discounted Cash
Flow technique
3) Explain the profitability Index for mutually exclusive
projects and what does a positive NPV indicate? A negative NPV?
4) What is meant by [performing a post-audit of investment
projects?
5) Explain what the Internal Rate of Return Method (IRR)
does?
6) What is the decision rule for NPV> For IRR
7) What is the Annual Rate of Return?

Project A has a net present value of $1,500, a payback period of
2 years, and an internal rate of return of 12%. Project
B has a net present value of $1,800, a payback period of 4 years,
and an internal rate of return of 10%. Project C has a
netpresent value of $1,750, a payback period of 3 years, and an
internal rate of return of 11%. If the projects are
mutually exclusive, which project should be undertaken?
A.
Project A because...

11.
The discount rate that makes the net present value of an
investment exactly equal to zero is the:
A)
Payback period.
B)
Internal rate of return.
C)
Average accounting return.
D)
Profitability index.
E)
Discounted payback period.
12.
The internal rate of return (IRR) rule can be best stated
as:
A)
An investment is acceptable if its IRR is exactly equal to its
net present value (NPV).
B)
An investment is acceptable if its IRR is exactly equal to...

Year Project A Expected Cash Flows ($) 0 (1,250,000) 1 75,000 2
218,750 3 535,000 4 775,000 5 775,000 Year Project B Expected Cash
Flows ($) 0 (1,050,000) 1 650,000 2 500,000 3 226,250 4 137,500 5
62,500 Metrics Payback Period (in years) (A)3.54 (B)1.8 Discounted
payback period (in years) (A)4.58 (B)2.72 Net Present Value (NPV)
(A)$160,816 (B)$151,742 Internal Rate of Return (A)18.90% (B)23.84%
Profitability Index (A)1.13 (B)1.14 Modified Internal Rate of
Return (MIRR) (A)17.82% (B)18.15% a). Which of the...

1. Under conditions of capital rationing (i.e., limited capital
funds are available), the optimal allocation of funds to capital
investment projects occurs when management uses which one of the
following decision models?
a. Internal Rate of Return (IRR)
b. Discounted accounting rate of return
c. Profitability Index (PI)
d. Discounted Payback (WRONG ANSWER)
e. Modified Internal Rate of Return (MIRR).
2. The payback period for evaluating capital investment projects
emphasizes:
a. Average net income divided by average investment
b. Average...

Discuss the concept of payback period vs. discounted payback
period. Also discuss the concept of Net Present Value (NPV) and why
it is important for companies to understand this model. Remember to
mention the value of this concept when different projects are under
consideration, especially when they have unequal lives.

Calculate the discounted payback, net present value, and
internal rate of return for the following cash flows. -60, -50, 6,
45, 60, 70, 60, 45, 20. Discount rate at 10%. Please show work for
the internal rate of return calculation.

Which of the following ignores the Time Value of Money
(TVM)?
Net Present Value (NPV).
Undiscounted Payback Period.
Discounted Payback Period.
Profitability Index (Benefit-Cost Ratio).

A
project's payback period can be evaluated by comparing the
a. payback period to the net present value
b. payback period to the project's useful life.
c. payback period to accounting rate of return
d. payback period to the required rate of return

A graph of the firm’s investment opportunities ranked in order
of the projects’: a. discounted payback b. internal rate of return
c. net present value d. payback Answer?

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