п»ї1. What is capital budgeting?
installment payments on your What are some characteristics that will make capital spending budget different from various budgets (like a product sales budget or perhaps cash budget)? It is the procedure by which managing plans, examines, and regulates investments in set assets. 3. Why is the idea of present worth relevant to capital budgeting, however, not so tightly related to other types of spending budget? An investment in fixed property may be considered as purchasing a series of net funds flows over a period of time. 5. Describe the Payback Period in your own words and phrases. Under what circumstances might Payback become an effective approach to use in assessing competing expenditure alternatives? The expected time frame that will elapse between the particular date of a capital expenditure plus the complete recovery in funds (or equivalent) of the sum invested. five. Describe the Accounting Charge of Returning in your own terms. What are their weaknesses as an investment evaluation tool? That measures the typical income as a percent of the average expenditure. Disadvantages are generally not directly taking into consideration the expected cash flows from your proposal nor directly with the timing in the expected money flows. 6th. Describe the calculation of NPV in your words. What does the word " Net" in Net Present Value consider? Capital investments that focus on the present benefit of the money flows expected from the assets. 7. Establish the Internal Rate of Go back. В
Inside Rate of Return uses present benefit concepts to compute the speed of go back from the net cash goes expected in the investment. 8. Johnson Firm plans to invest $3, 993 on a 5 year project that will return $1, 000 cash annually. Calculate the IRR; can it be 8%? Certainly, it's 8%.
9. Meeks Company spends $2709 pertaining to an investment that returns $2, 000 the first season, and $1, 000 the other year. Is the IRR likewise 8%? Yes.
10. Used, it seems that the NPV method is used more regularly than IRR. Why do you think this would be the situation? When the two methods lead to different...