I am an accounting major, and I need help with Business Finance. The topics we are reviewing are Capital Budgeting. If you can help, please let me know? 20 questions=150 dollars.1.
If you are evaluating a normal, independent project, then you should accept the project as long as
The IRR is positive
The Payback Period exists
The Modified IRR is greater than the IRR
The Discounted Payback Period exists
Use the following information for questions 2 and 3:
Project S has cash flows of (600), 400, 300. Project
L has cash flows of (900), 300, 400, 500. Both projects have a required return of 8%. The projects are
mutually exclusive and repeatable.
2. What is the Equivalent Annual Annuity of Project S?
3. What is the 6-yr NPV of Project L using the Replacement Chain approach?
Which of the following statements is CORRECT?
Assume that the project being considered has
normal cash flows, with one outflow followed by a series of inflows.
The longer a project’s payback period, the more desirable the project is normally considered
to be by this criterion.
One drawback of the payback criterion for evaluating projects is that this method does not
properly account for the time value of money.
The regular payback ignores cash flows beyond the payback period, but the discounted
payback method overcomes this problem.
If a company uses the same requirement to evaluate all projects, say it requires a payback of 4
years or less, then the company will tend to reject projects with relatively short lives and
accept long-lived projects, and this will cause its risk to increase over time.
For independent projects with normal cash flows, the NPV, Discounted Payback and IRR methods will
always lead to the same accept or reject decision.
This question was answered on: May 23, 2022
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