What is a hurdle rate in capital budgeting?a) The minimum rate of return required to proceed with a projectb) The rate at which the project’s NPV equals zeroc) The rate at which a company’s debt becomes unsustainabled) The cost of issuing new shares of stockno ai use
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What is a hurdle rate in capital budgeting?
a) The minimum rate of return required to proceed with a project
b) The rate at which the project’s NPV equals zero
c) The rate at which a company’s debt becomes unsustainable
d) The cost of issuing new shares of stock
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- Which of the following is a capital budgeting technique used to evaluate an investment project? A) Net Present Value (NPV) B) Return on Assets (ROA) C) Price-to-Earnings Ratio (P/E) D) Dividend Yield No aiHow is the payback period used in capital budgeting? Multiple Choice As a measure of a project's risk To determine the amount of funds that will be required in the future To measure the relationship between the project's return and the company's cost of capital None of the aboveHello tutor , answer this question What is the Net Present Value (NPV) rule in capital budgeting, and why is it considered superior to the Payback Period method?
- Marginal analysis and capital budgeting decisions. A company faces the following schedule of potential investment projects (all assumed to be equal risk). Use marginal analysis to decide which projects should NOT be undertaken? Expected Rate of Return (%) Project alm|0|n|u|u A B с D E F CH G 1 Investment Required ($ million) 25 15 40 35 12 20 18 13 7 OF and G OH and I OF, G, H, and I 01 OG, H, I 27 24 21 18 15 14 13 11 8 Cumulative Investment The following is the cost of acquiring the funds needed to finance these investment projects. Cost of Capital (%) Block of funds ($ million) First 50 10 Next 25 10.5 11 Next 40 Next 50 12.2 Next 20 14.5 25 40 80 115 127 147 165 178 185 50 75 115 165 185 Cumulative Funds RaisedDiscuss the connection between capital budgeting decisions and the enterprise’s cost of capital. Would an enterprise ever decide to embark on a project whose rate of return would be less than its cost of capital? Why or why not?The net present value (NPV) method estimates how much a potential project will contribute to Business ethics/Shareholders Wealth/Employee Benefits, and it is the best selection criterion. The Smaller/Larger the NPV, the more value the project adds; and added value means a Higher/Larger stock price. In equation form, the NPV is defined as: CFt is the expected net cash flow at Time t, r is the project's risk-adjusted cost of capital, N is its life, and cash outflows are treated as negative cash flows. The NPV calculation assumes that cash inflows can be reinvested at the project's risk-adjusted RD/RS/WACC. When the firm is considering independent projects, if the project's NPV exceeds zero the firm should Accept/Reject the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the Lowest Positive/Lowest Negative/Highest Postive/ Highest Negative NPV.Quantitative Problem: Bellinger Industries is considering two projects for inclusion…
- What is the connection between capital budgeting decisions and the enterprise’s cost of capital? Would an enterprise ever decide to embark on a project whose rate of return would be less than its cost of capital? Why or why not?The duration of time within which the investment made for the project will be recovered by the net returns of the project is known as а. Accounting rate of return method b. Payback period С. Net present value method d. Period of return Capital budgeting is the process of evaluating and selecting short-term investments that are consistent with the firm's goal of maximizing owners' wealth. Select one: True FalseA firm's WACC for capital budgeting purposes for a planning period is a. The height of the MCC schedule at the expected level of capital spending. b. At the intersection of the MCC and the IOS c. Always beyond the break point of the MCC. d. Usually less than the cost of debt.
- Discuss the payback period, NPV (net present value), and IRR (internal rate of return) methods for capital budgeting analysis. What result does each method provide the user? What are the limitations of each of these methods? Which method would you find most useful in making the best investment decisions for your business and why?Which methods of evaluating a capital investment project ignore the time value of money? Multiple Choice Net present volue and accounting rate of retum, Accounting rate of return and internal rate of return. Internal rate of return and payback perlod.In capital budgeting decisions, are there reasons a company might choose to take a project that was NPV negative? Explain.
