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When the present value of the cash inflows exceeds the initial cost of a project then the project should be?
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A project has an initial cost of 52125 expected net cash inflows of 12000 per year for 8 years and a cost of capital of 12 percent What is the projects MIRR and What is the projects PI?
The MIRR of this project is 13.89% and the PI is 1.13.
What is the meaning of expected net present value?
It is the expected value of all cash flows of a project brought back to the present value, by discounting it by the cost of capital involved in the project.
What are the differences between social cost benefit analysis and financial analysis?
Benefit-cost analysis determines whether the direct social benefits of a proposed project or plan outweigh its social costs over the analysis period. Such a comparison can be displayed as either the quotient of benefits divided by costs (the benefit/cost ratio), the difference between benefits and costs (net benefits), or both. A project is economically justified if the present value of its benefits exceeds the present value of its costs over the life of the project. Financial Analysis. The objective of financial analysis is to determine financial feasibility (that is, whether someone is willing to pay for a project and has the capability to raise the necessary funds). A financial analysis answers questions such as, Who benefits from a project? Who will repay the project costs, and are they able to meet repayment obligations? Will the beneficiaries be financially better off compared to what they will be obligated to pay?
What is payback period?
Payback period is the number of years required to recover the cost of project or initial cash out flows. Say a project requires an initial investment of $10,000 and you can expect cash inflows at the end of each of the next four years in amounts of $5,000 $4,000 $3,000 and $1,000 N---- CF ----------- Cumulative Cash Flow 0---- -10,000(p) 1---- 5,000 -------- 5,000 2q-- 4,000 -------- 9,000 r 3---- 3,000s ------ 12,000 4---- 1,000 -------- 13,000 As we notice that year before recovery is 2. And to get the remaining months out of Year 3, we do the following calculations (10,000 - 9,000)/3000 1,000/3,000 0.333 years 0.333 x 12 months 4 months Thus regular payback period is 2 years and 4 months
What is the decision rule for net present value?
Net Present Value is a technique that is used in selection of Projects.Present Value (PV) and Net Present Value (NPV) - To understand these two concepts, understand that one rupee today can buy you more than what one rupee can buy next year. (Inflation) The issue arises because it takes time to complete a project, and even when a project is completed, its benefits are reaped over a period of time and not immediately. For Ex: It is like planting a coconut tree. It costs you money to buy it, but after a few years, it will give you a continuous supply of coconuts which you can sell and make a profit.So, to make an accurate calculation for the profit, the cost and benefits must be converted to the same point in time. The NPV of a project is the present value of the future cash inflows minus the present value of the current and future cash outflows. For a project to be worth-while economically, the NPV must be positive.As an example, assume you invest Rs.300,000 today to build a house, which will be completed and sold after three years for Rs.500,000. Also assume that real estate that is worth Rs.400,000 today will be worth Rs.500,000 after three years. So the present value of the cash inflow on your house is Rs.400,000, and hence the NPV is the present value of the cash inflow minus the present value of the cash outflow, which equals Rs.400,000?-300,000, which equals Rs.100,000.
What is conventional projects?
A project with a negative initial cash flow(cash out flow),which is expected to followed by one or more future positive cash flows(cash inflows) is called conventional project.
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.
A project has an initial cost of 52125 expected net cash inflows of 12000 per year for 8 years and a cost of capital of 12 percent What is the projects MIRR and What is the projects PI?
The MIRR of this project is 13.89% and the PI is 1.13.
If the opportunity cost of capital for a project exceeds the projects IRR then the project has a NPV negative?
If the opportunity cost of capital for a project exceeds the Project's IRR, then the project has a(n)
What method of evaluating capital investment proposals uses the concept of present value to compute rate of return?
The method that uses the concept of present value to compute rate of return is called the Net Present Value (NPV) method. In this method, the cash inflows and outflows of a capital investment proposal are discounted to their present value using a discount rate. The NPV is then calculated by subtracting the initial investment from the present value of the cash flows. A positive NPV indicates a profitable investment, while a negative NPV suggests an unprofitable investment.
What is the purpose for an initial contact with a client regarding a project?
purpose for an initial contact with a client regarding a project
Which methods of capital budgeting are the most frequently used?
The most frequently used methods of capital budgeting include net present value (NPV), internal rate of return (IRR), and payback period. NPV compares the present value of cash inflows to the present value of cash outflows over the project's lifespan, taking into account the time value of money. IRR calculates the rate of return that would result in a net present value of zero. Payback period measures the time required to recover the initial investment.
What are the outputs of the initial process group?
-Stakeholder register -Project charter
How do you initiate a project?
Initiating a Project:Initiating a project means defining the project, getting approval from people to start it, and identifying and analyzing the project stakeholders. During this stage the initial scope of the project is defined. Accordingly, initial resources are determined and allocated, a project manager with an appropriate authority level is assigned, and project stakeholders are identified.
What is the payback period of the following prject initial investment 50000 projected life 8 years net cash flows year1 5000?
In this question only cash inflow for year 1 is provided but if the project life is 8 years then cash inflows and outflows of 8 years are required to find out the payback period of this project but if it is assumed that the cash inflow of year 1 of 5000 is continues for all 8 years then project will unable to even recover its cost as 5000 * 8 = 40000 so the project will bear a loss of 10000.
How is a Project Initiated?
Initiating a project means defining the project, getting approval from people to start it, and identifying and analyzing the project stakeholders. During this stage the initial scope of the project is defined. Accordingly, initial resources are determined and allocated, a project manager with an appropriate authority level is assigned, and project stakeholders are identified.Defining the project includes the following tasks:1. Developing project objectives and describing how they are related to the organization's business objectives and strategy.2. Specifying the project deliverables, such as products, services, or results, that will meet the objectives of starting this project.3. Based on the objectives and deliverables, defining the initial scope of the project by explaining what will be done and drawing boundaries around what will be done and what will not be done.4. Based on the initial scope, estimating the project duration and the resources needed. Only an Initial estimate would be made so that resources can be procured accordingly. An even accurate estimate would be made during the planning phase5. Defining the success criteria. The project definition is incomplete without defining its success.6. Assigning the initial project resources.7. Assigning a project manager if one is not already assigned.8. Authorizing the project. While different organizations may have a different process to approve the processes, the standard way to do it is to approve the document that holds the definition of the project, such as the project charter.
What is project viability?
Project viability states outcome of a project must be prudent and profitable comparing with its associated cost, time, quality, and manpower requirement. For ex: a project is not consider viable if its value exceeds its costs. Rajib Dev (JnU)BD.
