Which of the following would increase the net present value (NPV) of a project?a) Increasing the discount rateb) Increasing the initial investmentc) Increasing future cash inflowsd) Reducing the length of the project no use ai

Which of the following would increase the net present value (NPV) of a project?a) Increasing the discount rateb) Increasing the initial investmentc) Increasing future cash inflowsd) Reducing the length of the project no use ai

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter25: Capital Investment Analysis

Section: Chapter Questions

Problem 5DQ

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Question

Which of the following would increase the net present value (NPV) of a project?
a) Increasing the discount rate
b) Increasing the initial investment
c) Increasing future cash inflows
d) Reducing the length of the project
no use ai

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Question 5: Find the net present value, interpret whether the NPV suggests you should accept or reject the project, find the payback period, find the discounted payback period, find the profitability index, interpret whether the profitability index suggests you should accept or reject the project, find the internal rate of return, explain whether the internal rate of return can repay the cost of borrowing money to conduct the project, find the modified internal rate of return, and explain with the modified internal rate of return can repay the cost of borrowing money to conduct the project. All for the following situation: The initial capital outlay is $175,000, the first-year annual operating cash flow is projected to be 20,000 but should grow by 5% per year during each of the project's 30 years, the after-tax-salvage cash flow is guessed to be $500,000, the required rate of return on this project is 15.50% and the company weighted average cost of capital is 12.50%.
Which of the following would cause a project to have a lower net present value, thereby making the project less appealing? A. The discount rate increases B. The cash flows are extended over a longer period of time. C. The investment cost decreases without affecting the expected income and life of the project. d. The cash flows are accelerated and the project life is correspondingly shortened.
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
2.When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)? A. so that you can see which project has the greatest net present value (NPV) B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter timeframe C. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered D. so that the projects can be compared on their cost or value created per year
Subject:- finance