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What method of evaluating capital investment proposals uses the concept of present value to compute rate of return?
The present value method of analyzing capital investment proposals involves the discounting of future cash flows provided by the investment using the the opportunity cost of capital, or weighted average cost of capital. By discounting the cash flows, you are then able to compare the initial investment with the future cash flows in present value terms. When the sum of future cash flows provide a premium to the initial investment, the net present value becomes greater than zero, and the capital investment should be considered. On the other hand, if the initial investment exceeds the sum of future cash flows, the net present value of the project is less than zero and should be discarded.
What else can I help you with?
Can investment depreciation reserve be considered as free reserve to compute as tier you or tier ii capital?
Investment deportation reserve not considered as free reserve
How do you compute capital gains tax?
To compute capital gains tax, subtract the original purchase price of an asset from the selling price to determine the capital gain. Then, apply the capital gains tax rate to the gain to calculate the tax owed.
How do you compute marginal cost of capital?
Take the first-order derivative of the cost of capital function.
What is a capital investment's net present value?
Widely used approach for evaluating an investment project. Under the net present value method, the present value (PV) of all cash inflows from the project is compared against the initial investment (I). The net-present-valuewhich is the difference between the present value and the initial investment (i.e., NPV = PV - I ), determines whether the project is an acceptable investment. To compute the present value of cash inflows, a rate called the cost-of-capitalis used for discounting. Under the method, if the net present value is positive (NPV > 0 or PV > I ), the project should be accepted.
The Guillermo furniture store scenario Compute the return on investment residual income and economic value added for the current situation?
The Guillermo furniture store scenario Compute the return on investment residual income and economic value added for the current situation?
How will you compute the cost of debt capital?
we keyin the credit then we take out the debit.?
How do you compute the Marginal Cost of Capital schedule?
Marginal or incremental cost of capital is cost of the additional capital raised in a given period
How compute cost of debt for WACC of a 5y project for company that has NO access to long-term debt markets?
1. If company has no access to long term debt as a source of capital then weighted average cost of capital will only include the rate of equity as a WACC for discounting long term projects as firm has not a mix of debt and equity to finance its investment projects
In a paragraph when you say First do you have to put a capital letter after?
No. It's not necessary. Example: First, compute for the greatest coefficient.
How do you compute the profitability index of a capital-budgeting proposal?
Dividing the present value of the annual after-tax cash flows by the cost of the project
How to compute cost to be capitalized for acqusition of assets?
The cost to be capital its depend upon the company policy whether they should capitalze the cost or not.
How to compute discounted payback period?
What is the payback period of the following project? Initial Investment: $50,000 Projected life: 8 years Net cash flows each year: $10,000
