QuizzesQuestion 310 ptsWhich of the following statements is true?1. The required rate of return is the maximum rate of return that an investment project must yield to the acceptable.2. The cost of capital is the average rate of return that the company earns on its investments.3. The net présent value method assumes that cash flows from a project are immediately reinvested at a rate ofreturn equal to the internal rate of return.O1None of the statements are true.Only statement 1 is true.All of the statements are true.Only statement 3 is true.Question 4@12->C25%$4#39Wer31thp6&27yu10 pts006

The required rate of return is not the maximum rate of return that an investment project must yield…

Answered: Quizzes Question 3 10 pts Which of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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3.1 Determine the values K, L, M, and N in the table. 3.2 Calculate the total present value of the net cash flows of the investment opportunity. 3.3 If the Net Present Value of the investment opportunity is an unfavourable R99 290, what is the initial outlay?
I. If there is a positive NPV, IRR is higher than the cost of capital.II. If annual net cash inflow is equal to the cost of investment, then, NPV is zero. A• FF B• TF C• TT D• FT
How many of the following investment criteria always use all of a project's cash flows in their calculation? • NPV • Payback period • IRR • Profitability index 1 2 3 4
The net present value is ... O A. The return which is required for an investment O B. The current worth of a future stream of cash O C. The length of time it takes to recover the initial investment of a project O D. The sum of a time series of discounted cash inflows and outflows
19. All else being equal, a company would choose to invest in a capital asset if which of the following is true?⦁ If the payback period equals the amount invested⦁ If the expected accounting rate of return is less than the required rate of return⦁ If the expected accounting rate of return is greater than the required rate of return⦁ If the average amount invested is equal to the net cash inflows
The internal rate of return method assumes that the cash flows over the life of the project are reinvested ata. the risk-free rate.b. the firm's cost of capital.c. the computed internal rate of return.d. the market capitalization rate.
What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment? Select one: a. Return of investment b. Yield c. Rate of return d. Economic return
have any redeeming qualities? LO 4 8.5 Net Present Value Concerning NPV: Describe how NPV is calculated and describe the information this measure provides about a sequence of cash flows. What is the NPV criterion decision rule? a. Why is NPV considered to be a superior method of evaluating the cash flows from a project? Suppose the NPV for a project's cash flows is computed to be $2,500. What does this number represent with respect to the firm's shareholders? b.
be appropriate? Explain. 8.4 Average Accounting Return Concerning AAR: LO 2 Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule? a. b. What are the problems associated with using the AAR as a means of evaluating a project's cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?
Question 1 Which one of the following statements is NOT correct? Group of answer choices If the initial cost of a project is increased, the net present value of that project will decrease. The MIRR is specifically designed to address conventional cash flows. If the internal rate of return equals the required return, the net present value will equal zero. Net present value is equal to the investment’s cash inflows discounted to today's dollars minus the initial cost of the investment. Net present value is negative when the required return exceeds the internal rate of return.
29. Which one of the following statements is correct regarding capital Investment appraisal methods?a) The Payback period takes into account all the cash flows accruing to the projectb) The Net Present value method does not take the time value of money into accountc) The Accounting Rate of Return takes the time value of cash flows into consideration and is the one most often used in practice by business organisationsd) The Internal Rate of Return is the discount rate at which the net present value is zero
Q2. Compute the rate of return on the investment characterized by the following cash flow. Year 0 1 3 4 S Cash Flow -$50.0 +20.0 -40 +36.8 +36.8 +368

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