which of the following is true about net initial investments? course hero

What is the net initial investment for a piece of equipment?

Mar 19, 2017 · This preview shows page 40 - 42 out of 49 pages. 1) Which of the following is a component of net-initial-investment cash flows? A) original cost of an old equipment B) cash outflow to purchase a new equipment C) depreciation cost D) after-tax cash flow from operations Answer: B Diff: 2. Objective: 5 AACSB: Analytical thinking 2) The Fortive ...

Which would result in counting the initial investment twice in discounted cash flow?

Jun 05, 2019 · Incorrect Question 33 0 / 1 pts A firm with a cost of capital of 15% is evaluating two independent projects utilizing the internal rate of return technique. Project X has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project Z has an initial investment of $120,000 and cash inflows at the end of each of the next …

How can an individual investor beat the market?

32. When ranking two mutually exclusive investments with different initial amounts, management should give first priority to the project A. That generates cash flows for the longer period of time. B. Whose net after-tax flows equal the initial investment. C. That has the greater accounting rate of return. D. That has the greater profitability ...

When can investment correlations be minimized?

d.)It can be minimized when investment correlations are at zero or even slightly positive.

Is a broader market return uncorrelated?

It is uncorrelated with broad er market returns.

What is the term for a capital budgeting technique that tracks and (based on success to date) modify resource levels

Using capital budgeting techniques to track and (based on success to date) modify resource levels committed to staged R&D investments is called timed options.

What is the future value of an ordinary annuity of $1 table 9% and 20 yr?

Future Value of an Ordinary Annuity of $1 table 9% & 20 yr = 51.160

What is required rate of return?

The Required Rate of Return (RRR) is set externally by creditors as the interest rate on long term liabilities.

How much is the total accumulated cash flow for the first 2 years?

The total accumulated cash flows for the first 2 years = $80,000

What is NPV in finance?

Net Present Value ( NPV ): Net Present Value is the difference between the sum of the present values of the future cash flows of the project and the initial cost of the project. Companies use weighted average cost of capital as the discount rate to calculate the NPV.

What is the profitability index?

Profitability index is defined as the present value of the future cash flows divided by the initial investment.

Why do NPV and PI give the same acceptance or rejecting decisions?

The NPV and PI methods will give the same accepting or rejecting decisions. The reason is when the NPV is Positive; the PI is also greater than one.

What is the decision rule for the Net Present Value method?

The decision rule for the Net Present Value method is – accept the project if the Net Present Value is greater than zero or reject the project if the Net Present Value is less than zero. The value of the firm rises by the Net Present Value of the project.

Is it rare to have exceptionally profitable projects?

In the long run, all projects generate normal profits. Exceptionally profitable projects are very rare, since the new inventions most of the times fail. The first step in the capital budgeting process i.e. Generation of exceptionally profitable project idea is very crucial. Screening of profitable projects also plays an important role in selecting the exceptionally profitable project.

Can both projects be accepted?

Conclusion: Since both the projects are generating positive NPVs, both the projects can be accepted.