which of the following is not considered a stage in the capital budgeting process course hero

What are the stages of the capital budgeting process?

The capital budgeting process consists of all of the following stages except: a. follow-up. b. selection. c. implementation. d. development. e. all of the above are included in the capital budgeting process E. all of the above are included in the capital budgeting process 23.

What should the analyst focus on during the capital budgeting process?

C. analysts should focus on the project's cash flows, uncontaminated by cash flows from the firm's other activities 21. All of the following are considered stages in the capital budgeting process EXCEPT:

What is the required rate of return for capital budgeting?

Your required rate of return is 12%. You should accept Project A based on the NPV for each project. The capital budgeting process should follow the following four steps: (1) Finding projects, (2) Evaluating and selecting projects, (3) Estimating incremental cash flows, and (4) Implementing and monitoring projects.

What do capital budgeting projects usually require?

Capital budgeting projects usually require large initial investments and may involve acquiring or constructing plant and equipment. e. all of the above statements are correct E. all of the above statements are correct 37. All of the following statements are correct except:

Which NPV should be chosen in cases of conflict among mutually exclusive projects?

Why is NPV preferred over payback period?

What does NPV zero mean?

Should you accept Project A based on the NPV?

Does the payback method consider cash flows?

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finance quiz chapter 10 Flashcards | Quizlet

Study with Quizlet and memorize flashcards containing terms like A negative net present value project that may ultimately lead to a highly positive net present value project is called a(n) ____ option., What is the internal rate of return for a project that has a net investment of $60,000 and the following net cash flows: Year 1 = $15,000; Year 2 = $20,000; Year 3 = $25,000; Year 4 = $30,000 ...

Which NPV should be chosen in cases of conflict among mutually exclusive projects?

In cases of conflict among mutually exclusive projects, the one with highest NPV should be chosen because NPV indicates the dollar amount of value that will be added to the firm if the project is undertaken.

Why is NPV preferred over payback period?

The NPV is preferred over the payback period as it takes into account the time value of money.

What does NPV zero mean?

An NPV of zero means that the firm's overall value will not change if the new project is adopted because the new project is expected to generate exactly the firm's required rate of return.

Should you accept Project A based on the NPV?

You should accept Project A based on the NPV for each project.

Does the payback method consider cash flows?

The payback method does not consider the cash flows that occur after the payback period.

Identification of Investment Opportunities

The first step of a capital budgeting process is the identification of an investment option. The business considering capital budgeting must find the reason for investment in this step.

Development and Forecast of Benefits and Costs

In the second step of a capital budgeting process, businesses need to find out the costs assuming the necessary developments of the project. A number of factors may influence this step, including cash flows.

Evaluation of Net Benefits

The third step of the capital budgeting process is probably the most important. It includes the estimation of the benefits the company may derive from the project.

Authorization for Progressing and Spending Capital Expenditure

In the fourth step of a capital budgeting process, the business managers must check the first three steps and authorize the process. This is in fact, a management function that relies on finance managers to allow the funds for the project.

Control of Capital Projects

The final step of a capital budgeting process includes control of the project in order to optimize the funds allocated and spent for specific tasks. It is a step that should be closely monitored by business managers so that the project runs smoothly and stays on track. The success of a project also relies heavily on this step.

Which NPV should be chosen in cases of conflict among mutually exclusive projects?

In cases of conflict among mutually exclusive projects, the one with highest NPV should be chosen because NPV indicates the dollar amount of value that will be added to the firm if the project is undertaken.

Why is NPV preferred over payback period?

The NPV is preferred over the payback period as it takes into account the time value of money.

What does NPV zero mean?

An NPV of zero means that the firm's overall value will not change if the new project is adopted because the new project is expected to generate exactly the firm's required rate of return.

Should you accept Project A based on the NPV?

You should accept Project A based on the NPV for each project.

Does the payback method consider cash flows?

The payback method does not consider the cash flows that occur after the payback period.