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True or False - The IRR assumes that cash flows are reinvested at the cost of capital?
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∙ 14y ago
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∙ 14y ago
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The NPV assumes cash flows are reinvested at the?
The NPV assumes cash flows are reinvested at the: A. real rate of return B. IRR C. cost of capital D. NPV
3 main components of the capital account?
Debt flows, Foreign Direct Investment Flows and Portfolio Investment Flows
How does the capital consumption allowance affect the firms cash flows?
answer the question
Why does capital budgeting look at cash flows and not net income?
Affect of net income is hard to determine due to any specific assets that's why capital budgeting decision making involves cash flows to determine cost and benefit analysis.
What is a working capital statement?
WORKING CAPITAL STATEMENT (WCS) is part of the financial statements' "Statements of Cash Flows or Changes in Financial Position." The WCS normally includes sections covering: Sources of Working Capital, Uses of Working Capital, and Working Capital Changes.
The NPV assumes cash flows are reinvested at the?
The NPV assumes cash flows are reinvested at the: A. real rate of return B. IRR C. cost of capital D. NPV
In what sense is a reinvestment rate assumption embodied in the npv irr and mirr methods what is the assumed reinvestment rate of each method?
IRR assumes that all cash flows are reinvested at the project's rate of return, seldom a defensible assumption. Since NPV discounts future cash flows at the investor's cost of capital, it more accurately represents the value of a project. It assumes that cash flows are reinvested at the cost of capital. This is a good assumption so long as the financing can be repaid in stages so as to reduce interest or equity cost. MIRR enables a project to be described with the simplicity of a percentage rate of return, as with IRR, but does not assume that cash flows can be effectively reinvested in the project at the calculated rate of return. Instead, cash flows are assumed to be reinvested at any given rate, such as a bank interest rate.
Weakness of the internal rate of return approach is that?
it implicitly assumes that the firm is able to reinvest the interim cash flows from a project at the firm's cost of capital
What is IRR reinvestment rate assumption?
The IRR reinvestment rate assumption is the mistaken assumption that the IRR of a project implicitly assumes that all positive cash flows from the project that occur in periods before the end of the project will be reinvested at the rate of IRR per period until the end of the project.
Why is the IRR not the MIRR the industry standard rate of return?
The IRR assumes all cash flows are reinvested at the IRR. All you need are the property cash flows and the initial outlay to solve the equation. So, it is a simple and objective calculation. For reference, the calculation is as follows: NPV = 0 = CF0/(1+IRR)^0 + CF1/(1+IRR)^1 + ... + CFn/(1+IRR)^n The MIRR assumes that positive cash flows are reinvested at a reinvestment rate. MIRR also assumes that negative cash flows are financed by the company at a finance rate. For reference the calculation is as follows: (( NPV of positive cash flows at reinvestment rate ) / ( NPV of negative cash flows at finance rate ))^(1/(n-1) - 1 This makes MIRR unsuitable as an industry standard. First, different firms have different reinvestment rates and different finance rates. So, MIRR cannot be used to compare investments purchased or sold by different companies. Second, the rates will change over time, thus making it impossible to compare MIRR's at different intervals. MIRR is best used internally by a particular firm choosing between several investments at a given time.
Which state of matter has volume and flows but no definite shape?
A liquid has a certain volume, flows, and assumes the shape of it's container.
Lymph always flows away from the heart?
False, it flows to the heart.
What river flows through the capital of United Kingdom?
The Thames River flows through the UK capital (London).
A mature river flows faster than a youthful river true or false?
False
Is this true or false where a river flows in a straight line the water flows faster along the rivers sides than near the center?
true
What are capital flows?
Look up the definition for capital mobility. Same thing
3 main components of the capital account?
Debt flows, Foreign Direct Investment Flows and Portfolio Investment Flows
