Why use net present value
[DOC File]Chapter 14—Capital Budgeting - CPA Diary
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Oct 10, 2009 · Those tools include:1) Payback Period Analysis (The number of years or periods required to recover an investment), 2) Net Present Value Analysis: the sum of the present values of all future cash flows less the initial investment, 3) Profitability Index: the ratio of the present value of future cash flows to the initial outlay (also known as the ...
[DOC File]Present financial position and performance of the …
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The net present value (NPV) of selling the old machine and purchasing the new machine now is-$1,606,950. Option 2. Sell old machine in five years and purchase new machine in five years. The company will have to make the scheduled maintenance costs for the old machine. Use a five-year annuity, discounted at 12 percent to find the present value ...
[DOC File]End of Chapter 15 Questions and Answers
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The project is expected to generate net cash flows to the subsidiary of 3 billion and 4 billion won in the two years of operation, respectively. The project has no salvage value. The current value of the won is 1,100 won per U.S. dollar, and the value of the won is expected to …
[DOC File]Multiple Choice Questions
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12. In the previous question, suppose the seller of the building wants $260,000. (a) Should you do the deal? Why or why not? [Hint: What would be the Net Present Value of the deal for the buyer at $260,000?] (b) What is the IRR if you pay $260,000? How does this …
[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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Nov 05, 2010 · 3.What is the net present value (NPV) of a long-term investment project? Describe how managers use NPVs when evaluating capital budget proposals. The net present value, or NPV, of a long-term investment project will be equal to the present value of all of the income streams earned, over time, adjusted for time, inflation, and interest rates.
[DOC File]Why might it be rational for a small firm that does …
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6. The net present value of a proposed project is $20,000 at a discount rate of 5% and ($28,000) at 10%. What is the internal rate of return of the project, to the nearest one decimal place? A 7.1%. B 7.5%. C 2.3%. D 8.6%. 7. The net present value of a proposed project is a positive $56,000 at a discount rate of 10% and a negative $28,000 at 20%.
Net Present Value Method | Net Present Value Definition & Formula
Net present value $ - 3,526 Thus, we would reject this project after adjusting for risk since the net present value is negative. Accounting for financial risk. The greater the use of leverage, or greater the debt-to-equity ratio, the greater the potential exposure to loss in equity capital well be. Leverage thus is associated with financial risk.
[DOC File]JustAnswer
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10. If the net present value is positive, the actual return on a project exceeds the required rate of return. ANS: T DIF: Easy OBJ: 14-3. 11. The net present value method provides the actual rate of return for a project. ANS: F DIF: Moderate OBJ: 14-3. 12. The profitability index gauges the efficiency of a firm’s use …
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