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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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Dobson Contractors is considering buying equipment at a cost of $75,000. The equipment is expected to generate cash flows of $15

Alex787 [66]

Answer: d. $1,534 positive net present value of the cash flows. Based on present value considerations, Dobson Construction should buy the machine.

Explanation:

To calculate the Net Present Value, we take the present values of all the future cashflows and subtract the initial cost from this amount.

Now, the cashflows are stable and this means that we can use the Present Value of an Annuity factor to find out the present value of the cashflows. We can then use a simple present value formula to find out the PV of the sale price.

I have attached a table that shows the PVIFA factors to make our calculations easier.

With interest rates at 12% and the year being 8 years, the PVIFA factors is 4.9676

Calculating therefore we have,

= 15,000 * 4.9676

= $74,514

This is the present value of 8 years of $15,000 cash flows.

In the same year, the machine can be sold for $5,000 so the present value of that is,

= 5000 / ( 1 + 12%)^8

= $2,020

Adding those together we get,

= 74,514 + 2,020

= 76,534

= $76,534

Subtracting the original cost we have,

= 76,534 - 75,000

= $1,534 in positive cashflow.

Net Present Value = $1,534

This means that Based on present value considerations, Dobson Construction should buy the machine due to a $1,534 positive net present value.

7 0

1 year ago

U.S.-based companies should turn to the _____ for the most comprehensive source of export information.

Juliette [100K]

Answer:

Department of commerce

Explanation:

U.S.-based companies should turn to the department of commerce for the most comprehensive source of export information.

The department of commerce is a section in the United States government. It creates jobs through good and favorable international trade terms, sustainable development and through access to high technology.

It provides companies with trade informations of which exports is one.

6 0

2 years ago

When business improved, Tasha Lind determined that the company had a talent shortage. Which of the following methods should she

Len [333]

Answer:

c. Outsource to a third party

Explanation:

At that time when business improved, Tasha Lind saw that the company is suffering with shortage of talent. From the given following methods she should use outsource to a third party for managing the shortage of talent because as outsource to a third party generally means that the company will give the contract of their work to any third party they wish. As company is suffering with shortage of talent, so the company will have to give contract to any other third party because company will not make its loss.

7 0

1 year ago

A farmer sells five pounds of pecans to a smith's fresh pecans for $10. smith's fresh pecans resells three pounds for $4.50 per

AURORKA [14]

$21.50 is added to GDP.

4 0

2 years ago

Which action best reflects the influence of John Maynard Keynes? O A. A business lobbies a government to reduce its overall tax

Sidana [21]

Answer:

Which action best reflects the influence of John Maynard Keynes?

B. A government gives jobs to workers during an economic recession.

Explanation:

John Maynard Keynes was a The British economist who strongly and vehemently advocated for "increased government expenditures, lower taxes, government offering full employment, and government intervention in economic activities" in order to stimulate demand, pull the economy out of recession, and kickstart it from slump. He is known as the father of Keynesian Economics.

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2 years ago