0
NPV measures the return a project generates against the costs borne to generate them, while also considering Time Value of Money. Whereas IRR measures returns alone and is hence seen as a myopic metric. NPV will be positive only when the IRR>WACC (i.e. the returns are more than the costs). The concept of IRR being greater than WACC is also called 'Positive EVA'.
Needless to say, a project must be selected when NPV > 0!
When choosing between projects, the spread between IRR & WACC will determine the financial feasibility ...the higher the better.
What else can I help you with?
What ia an allocation of scarce resource using some method other than price?
Rationing
A system of allocating scarce goods and services using some criteria other than price?
rationing
How is rationing different from a price based system?
it uses criteria other than price and is the basis of central planning
How is rationing different from a price based market system?
it uses criteria other than price and is the basis of central planning
What leads to rationing and black marketing under perfect competition?
when the quantity of the goods supplied decreases or lower than the demand
Should a corporation ration its capital when its projects earn more than the cost of capital?
A corporation should generally not ration its capital if its projects consistently earn more than the cost of capital, as this indicates that the projects are creating value and contributing positively to shareholder wealth. Rationing capital in such scenarios could lead to missed growth opportunities and reduced overall profitability. However, if there are constraints on available funding or if the corporation anticipates better investment opportunities in the future, it might consider rationing as a strategic choice. Ultimately, the decision should align with the company's long-term financial goals and market conditions.
The concept of capital rationing as it relates to current situation in the capital market?
Companies may want to implement capital rationing in situations where past returns of investment were lower than expected. For example, suppose ABC Corp. has a cost of capital of 10% but that the company has undertaken too many projects, many of which are incomplete. This causes the company's actual return on investment to drop well below the 10% level. As a result, management decides to place a cap on the number of new projects by raising the cost of capital for these new projects to 15%. Starting fewer new projects would give the company more time and resources to complete existing projects.
What does better the devil you know than the devil you don't know?
_I_t means that it is better to deal with a difficult person or situation one knows than with a new person or situation that could be worse.
In what situation is drum brake better than disc brake?
In case of cost..drum brake is better than disc brake.
What is a situation in which decimals to work better than a fraction?
nearly all
Why was the wartime diet better than ours today?
Well, wartime diets are better than ours today as they didn't have fast food, didn't over eat because of rationing and because they grew their own produce which was mostly vegetables, so they ate a lot of that.
Capital punishment is better than lifeinprisonment?
no. it means physical punishment. basically torture.
What is a situation in which decimals seem to work better than fractions to express a number less than one?
4
What is the situation in Kosovo?
Normal. In some parameters, even better than neighboring countries.
What is a situation which decimals seem to work better?
When absolute values are smaller than one!
What is the kosovo situation?
Normal. In some parameters, even better than neighboring countries.
What is a situation in which you would use fractions to express a number less than 1 What is a situation in which decimal seem to work better Math?
Whether fractions work better than decimals or less as well is very much a question of your preference.
