- Taxes are based on the difference between the book value and the sales price, The difference between a firm's current assets and its current liabilities is known as the ___, An increase in depreciation expense will____ cash flows from operation. Which of the following statements is true? Which one of the following statements is NOT true about preferred stock? It is generally of two types. Explain how the following project interactions affect the evaluation of a capital project: (1) independent versus mutually exclusive projects, (2) project sequencing, and (3) unlim-ited funds versus capital rationing. The basic approach to evaluating cash flow and NPV estimates involves asking. Search for jobs related to Which of the following is true of capital rationing or hire on the world's largest freelancing marketplace with 20m+ jobs. E. A and B only. Pursuing valuable ideas is the best way __________. The net present value method b. Unfortunately, most of the time the market value of a project, The primary risk in estimation errors is the potential to, b. make incorrect capital budgeting decisions, The goals of risk analysis in capital budgeting include, c. assessing the degree of financing risk, In order to analyze the risk of a project's NPV estimate, we should etablish (blank) for each important estimate variable, scenario analysis determines the impact on NPV of a set of events relating to a specific scenario. If the sign of the cash flows for a project changes two times, then the project likely has: A. one IRR. Companies should always choose the investment with the highest NPV b. A. Companies should always choose the investment with the highest ARR c. Companies should always choose the investment with the shortest payback d. None of the above b) Internal rate of return method is also known as time adjusted rate of return. When using ____, all of the variables except one are frozen in order to determine how sensitive the NPV estimate is to change in that particular variable. a. it does not consider interaction among variables, Accounts receivable and accounts payable are included in project cash flow estimation as part of changes in (blank). If a firm's variable cost per unit estimate used in its base case analysis is $50 per unit and they anticipate the upper and lower bounds to be +/- 10%, what is the "worst case" for variable cost per unit? Given the following data, what is the operating cash flow? Regarding capital rationing decisions for capital assets, which of the following is true? 13. A. (t/f) while performing sensitivity analysis, we recompute NPV several times by changing one input variable at a time, to investigate the impact on NPV of a change in one variable, you would employ (blank), an option on a real asset rather than a financial asset is known as a. Found inside – Page 238First , note that under conditions of true capital rationing , the firm's value is not being maximized — if management was ... Following constrained maximization behavior will , in general , result in a lower value than following ... Reasons for hard or soft capital rationing. Capital rationing is a technique of selecting the projects that maximize the firm’s value when the capital infusion is restricted. This comprehensive yet accessible text emphasizes problem solving, evaluation of projects, capital budgeting and resource allocation under risk and uncertainty. As the firm goes for more capital, the additional capital comes at an increased cost to the firm. Internal rate of return.
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