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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.
What else can I help you with?
How does the reinvestment rate assumption affect the NPV versus IRR conflict?
Apparently the NPV and IRR are methods to obtain capital budgets. The reinvestment rate assumption affects both methods because it is what determines now much incoming cash flow is reinvested into project.
Which accounting term best describes assumption made in applying the four inventory methods?
Cost Flow Assumption
What reinvestment rate assumptions are implicitly made by the net present value and internal rate of return methods and which method is best?
NPV's assumption is more conservative and realistic. because in order to accept the project, the IRR must be greater than the cost of capital.Both methods assume that a project will cost some money up front, and then produce cash flow returns over a period of time. Both assume that these cash flows will be reinvested by the firm.
Assumption made in applying the four inventory methods?
When applying the four inventory methods—FIFO (First-In, First-Out), LIFO (Last-In, First-Out), weighted average cost, and specific identification—an assumption is made regarding the flow of inventory. Specifically, it is assumed that the order in which inventory is purchased reflects the order in which it is sold, impacting cost of goods sold and ending inventory valuation. Additionally, these methods assume that inventory costs remain stable over time, which may not account for fluctuations in market prices. Lastly, the chosen method can significantly affect financial statements and tax liabilities, influencing managerial decisions.
What is different between theory and a hypothisis?
Hypothesis is an assumption. If approved by scientific methods, they can become theories. Therefore, hypothesis is under theory - hypothesis is usually a mathematic assumption.
What is pooling on interest methods?
is the accounting method, where balance sheet of daughter in book value is assumed with the mother
What assumption will work best for a large data set with a normal distribution?
The assumption that works best for a large data set with a normal distribution is that the data follows a bell-shaped curve, characterized by symmetry around the mean. In this context, the Central Limit Theorem supports that as the sample size increases, the sampling distribution of the sample mean will also approach a normal distribution, regardless of the original data's distribution. This allows for the application of parametric statistical methods, such as t-tests or ANOVA, which rely on normality. Additionally, it is assumed that the data points are independent of each other.
Did Mary's donkey have a saddle?
The Bible does not say; it also does not say she rode a donkey. The assumption that she may have is based on common methods of transport at the time and the fact that she was heavily pregnant.
What is a methodological assumption?
A methodological assumption is a foundational belief or principle that guides the research methods used in a study. It shapes how data is collected, analyzed, and interpreted, influencing the overall approach and design of the research. These assumptions help researchers make decisions about how to conduct their studies and what conclusions can be drawn from the data.
Hou do you measure and perceive time in different ways?
If you start under the assumption that consciousness is somehow linked to reality the two most apparent methods are meditaion (proper use of psychedellics) and physical death
What is heteroscadacity?
In regression analysis , heteroscedasticity means a situation in which the variance of the dependent variable varies across the data. Heteroscedasticity complicates analysis because many methods in regression analysis are based on an assumption of equal variance.
Is probability the basis of inferential statistics?
Yes. In applying inferential statistical methods the assumption is made that at least some of the variation observed in the data is due to randomness and that the laws of probability can be applied to take this into account in drawing conclusions from the data.
