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2 years ago

Which methods of evaluating a capital investment project use cash flows as a measurement basis?

Business

2 answers:

ruslelena [56]2 years ago

8 0

Answer:

Payback Period, Internal Rate of Return, and Net Present Value use cash flows for evaluating capital investment projects.

Explanation:

There are three methods of evaluating a capital investment project that use cash flows as a measurement. These include Payback Period, Net Present Value and Internal Rate of Return. The payback period gives the idea about the time that is required for a person to get back his initial investment. Internal rate of return is used to determine profitability of potential investment. Net present value refers to the difference between the present value of cash outflows and the cash inflows for a specific period of time.

Further explanation:

The Payback period: In this method of payback period, it simply calculates the amount of time that it will take to get one’s original investment back. It helps in analyzing any risks related to investments. An investment with a lesser payback period is seen as a better investment because investor’s original expenses are at risk for a lesser time.

Internal rate of return: Internal rate of return makes use of the discount rates which makes the present value of cash flows in future, equivalent to zero. This strategy helps in comparing the profitability of various investments in different projects.

Net present value: The net present value method makes use of investor's requisite rate of return to compute the present price of future cash flow from the project. Net Present Value is used in creating capital budget and investment planning to estimate the profitability of the project.

Learn More:

Disadvantage of the payback period method : brainly.com/question/13168811 - (Stokholm)

Project acceptance when NPV is used brainly.com/question/13228231 - (Matiasemella)

Keywords:

Capital investment project, cash flow, payback period, internal rate of return, net present value.

bixtya [17]2 years ago

6 0

The method of evaluating a capital investment project that use cash flows as a measurement basis are: Payback period, internal rate of return, and net present value.
- PAyback period, used to determine how much asset is back after the initial saving
- internal rate of return, Used to measure potential profit from an investment
- Net present value, used to determine the worth of all company's assets

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I sell shoes for $250 per pair. They cost me $25 to produce. My markup on cost is:______

aalyn [17]

Answer:

Markup percentage= 900%

Explanation:

Giving the following information:

I sell shoes for $250 per pair. They cost me $25 to produce.

To calculate the markup percentage, we need to use the following formula:

Markup percentage= [(selling price - unitary cost)/unitary cost]*100

Markup percentage= [(250 - 25)/25]*100

Markup percentage= 900%

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1 year ago

Zimmer-centerpulse is the world's largest producer of replacement hips and knees for orthopedic surgery. they are particularly i

mylen [45]

The correct answer is Demography

Zimmer-Centerpulse is the world’s largest producer of replacement hips and knees for orthopedic surgery. It is particularly interested in marketing in the southwestern United States, where a large aging population lives.

The demography most directly explains its continued growth.

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2 years ago

Thurman Corporation issued 450,000 shares of $.50 par value capital stock at the date of incorporation for cash at a price of $4

m_a_m_a [10]

Answer:

b) $225,000

Explanation:

Common Stock ($0.50 x 450,000) $225,000

Discount on capital (($4-$0.5) x 450,000 $1,575,000

Retained Earning ( $100,000 - $40,000 ) $60,000

Total Equity $1,860,000

Shares are recorded in the common stock account at the par value. Difference of $4 and $0.5 is recorded as add in capital excess of par common shares.

8 0

1 year ago

A delivery service is buying 600 tires for its fleet of vehicles. One supplier offers to supply the tires for $ 80 per tire, pa

nignag [31]

Answer:

$4,372.71

Explanation:

Here for reaching the difference in PV between the first and the second offer first we need to follow some steps which is shown below:-

Step 1

Total payment due = Per tire × Bought tires

= $80 × 600

= $48,000

Step 2

Present value factor of 8.4% for 1 year = 1 ÷ (1 + Rate of interest)^Number of years

= 1 ÷ (1 + 8.4%)^1

= 1 ÷ (1 + 0.084)^1

= 1 ÷ 1.084

= 0.92251

Step 3

First offer

Present value = Total payment due × Present value factor of 8.4% for 1 year

= $48,000 × 0.92251

= $44,280.48

Step 4

Second offer

One year payment = Bought tires × Per tire

= 600 × $45

= $27,000

Step 5

Present value = One year payment × Present value factor of 8.4% for 1 year

= 27,000 × 0.92251

= $24,907.77

Step 6

Total present value = Present value of second offer + Tires cost

= $24,907.77 + $15,000

= $39,907.77

Here we can see that first offer is higher than second offer

So,

The difference between the first and the second offer = First offer - Second offer

= $44,280.48 - $39,907.77

= $4,372.71

7 0

2 years ago

The HIJ bond has a current price of $800, a maturity value of $1,000, and matures in 5 years. If interest is paid semi-annually

yKpoI14uk [10]

Answer:

Explanation:

The coupon rate is defined as the interest rate paid on a bond by its issuer for the term of the security.

Hence,

Par Value = $800

Face Value = $1,000

N = 5 x 2 = 10

Since the interest is semi annual

i = 8% / 2 = 4%

CF = $15.34

Coupon = $30.68 per year or 3.068%

8 0

2 years ago