Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

All please 2. Which of the following factors should be included in the cash flows used to estimate a project's NPV? a Interest on funds

image text in transcribedAll please
2. Which of the following factors should be included in the cash flows used to estimate a project's NPV? a Interest on funds borrowed to help finance the project b. The end-of-project recovery of any working capital required to operate the project c. Cannibalization effects, but only if those effects increase the project's projected cash flows d. Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes 3. Which of the following is correct? onflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project higher but the IRR method ranks the other one first. In theory, such conflicts should be resolved in favor of the project with the higher positive IRR. basic rule in capital budgeting is that if a project's NPV exceeds its IRR, then the project should be accepted project's MIRR is independent of the firm's cost of capital. In other words, a project's MIRR doesn't change with a change in the firm's cost of capital. Conflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project higher but the IRR method ranks the other one first. In theory, such conflicts should be resolved in favor of the project with the higher positive NPV. C. A d. Richard Faber, CFO of Bellarmine Industries, is preparing a presentation on cash flow estimation and capital budgeting for the company's new class of interns. Which of the following statements is correct? a. An example of an externality is a situation where a bank opens a new office, and that new office causes 4. deposits in the bank's other offices to decrease. b. The existence of any type of externality will reduce the project's expected NPV. c. If one of the assets to be used by a potential project is already owned by the firm but not being used, then any d. An externality is a situation where a project would have an adverse effect on some other part of the firm. If cost associated with that asset is a sunk cost and should be ignored. the project would have a favorable effect on other operations, then this is not an externality

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

An Introduction To Wavelet Theory In Finance

Authors: Francis In, Sangbae Kim

1st Edition

9814397830, 978-9814397834

More Books

Students also viewed these Finance questions