Internal Rate of Return is used: a) To determine the interest rate at which benefits of a project are equivalent to its costs. b) To determine which investment to choose when one of two alternatives must be chosen. c) To determine the interest rate for an investment that yields no income. d) To choose an investment that necessary to preserve the operation of the business. e) To justify a “lost-leader” project of a strategic nature.
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- a) To determine the interest rate at which benefits of a project are equivalent to its costs.
- b) To determine which investment to choose when one of two alternatives must be chosen.
- c) To determine the interest rate for an investment that yields no income.
- d) To choose an investment that necessary to preserve the operation of the business.
- e) To justify a “lost-leader” project of a strategic nature.
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- Comparing Investment Criteria. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule. a. Payback period. b. Internal rate of return. c. Profitability index. d. Net present value.Which of the following theory is applicable to the following situation? A manager needs to raise funds to finance a new project and prefers to use internal financing. Group of answer choices signaling theory trade off theory MM Proposition pecking order theoryComparing Investment Decision Criterion. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criteria for accepting or rejecting independent and mutually exclusive projects under each rule. Payback period Modified Internal rate of return Internal rate of return Profitability index Net present value
- What should a manager do with a project that has two internal rates of return (IRRs)? O a. Do the project if the higher of the two IRRs exceeds the cost of capital. O b. Do the project if the lower of the two IRRS exceeds the cost of capital. Oc. Choose the IRR that looks the most reasonable, and do the project if this chosen IRR is greater than the cost of capital. Od. Abandon the project, as it involves unconventional cash flows. O e. Do the project if the net present value of the project is greater than zero.A situation in which taking one investment prevents the taking of another is(are) called: O Net present value profiling. Operational ambiguity. Mutually exclusive projects. O Issues of scale. O Multiple rates of return.Explain how you would evaluate the expected rate of return from the investment (purchasing a company) and the method to evaluate the investment decision. Assess the disadvantages and advantages of the investment method and why the method would provide the most accurate measure for the anticipated rate of return requirement. Justify your recommendation.
- In pursuing one’s investment objective, which is specified in terms of return requirement and risk tolerance, one should bear in mind the constraints arising in the investment process. What could be these investment constraints? Describe with examples.I asked this question before, but for some reason, even though it was answred I cannot see it, it marks an error when I try to open it. So here it is again: Comparing Investment Criteria. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule. a. Payback period. b. Internal rate of return. c. Profitability index. d. Net present value. Thank you!Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a proposed capital investments? Give an example of each.
- How can we use the internal rate of return to evaluate whether we should pursue a specific project? Should we pursue a project when the cost of capital is higher than the internal rate of return?The ARR has one specific advantage not possessed by the payback period in that it a.considers the time value of money. b.measures the value added by a project. c.is always an accurate measure of profitability. d.is more widely accepted by financial managers. e.considers the profitability of a project beyond the payback period.1. State the advantages and disadvantages of each capital investment appraisal method b. Calculate the risk and return presented by the Fastcoat and Speedscreen options and a recommendation as to which option should be chosen, given the lack of investment capital available to the company