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When the present value of the cash inflows exceeds the initial cost of a project then the project should be?
When the present value of the cash inflows exceeds the initial cost of a project, the project should be accepted. This indicates that the project is expected to generate a positive net present value (NPV), suggesting it will add value to the organization. Accepting such a project aligns with maximizing shareholder wealth and achieving financial growth.
The initial research and development of a business idea is paid for with what capital?
Seed capital
What is Pay back period method?
Method of evaluating investment opportunities and product development projects on the basis of the time taken to recoup the investment. This period is compared to the required payback period to determine the acceptability of the investment proposal. In contrast to return on investment and net present value methods, the cash inflows occurring after the payback period are not included in this method. Formula: Payback period (in years) = Initial capital investment ÷ Annual cash-flow from the investment.
What is the NPV of a project that has an IRR exactly equal to its cost of capital?
If a project's internal rate of return (IRR) is exactly equal to its cost of capital, the net present value (NPV) of the project is zero. This means that the project's cash inflows, discounted at the cost of capital, exactly match the initial investment, resulting in no net gain or loss. Consequently, the project neither adds nor subtracts value to the investment. Thus, it is considered a break-even scenario in terms of financial viability.
What is the purpose of initial public offering?
The purpose of an Initial Public Offering is to offer shares of a company to the public for the very first time. An initial pricei is set for the share and then investors from across the country can opt to invest in the IPO. Once an IPO is complete, a good % of shares of a company are owned by the public and and the stock gets listed in a registered stock exchange like NYSE.The purpose of an IPO for that company is to raise working capital. The money raised through the IPO is used by the company for expansion projects, meet its capital requirements etc.For raising the capital from the public directly
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 capital budgetingEnumerate and explain the various methods for evaluation of capital expenditure projects?
Capital budgeting is the process of planning and evaluating long-term investments in projects or assets that are expected to generate future cash flows. Key methods for evaluating capital expenditure projects include: Net Present Value (NPV): This method calculates the difference between the present value of cash inflows and outflows, helping to determine the profitability of a project. Internal Rate of Return (IRR): IRR is the discount rate that makes the NPV of a project zero, indicating the project's expected rate of return. Payback Period: This method measures the time required to recover the initial investment, providing insight into the project's liquidity risk. Profitability Index (PI): PI is the ratio of the present value of future cash flows to the initial investment, helping to assess the relative profitability of multiple projects.
When the present value of the cash inflows exceeds the initial cost of a project then the project should be?
When the present value of the cash inflows exceeds the initial cost of a project, the project should be accepted. This indicates that the project is expected to generate a positive net present value (NPV), suggesting it will add value to the organization. Accepting such a project aligns with maximizing shareholder wealth and achieving financial growth.
Payback period concept is best explained by what?
Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques.
What is the formula for the payback period?
Formula for the Payback Period. Payback period = Initial investment / Annual Cash inflows
What is a capital fund drive?
A capital fund drive occurs when the company goes on a quest to raise more capital to finance various projects. Companies can do that by holding an initial public offer.
What is the difference between projects with normal cash flow and nonnormal cash flow?
Projects with normal cash flow have cash inflows that follow an initial investment outflow, typically resulting in a single change in the cash flow sign (e.g., negative to positive). In contrast, nonnormal cash flow projects involve multiple changes in the cash flow sign, meaning they can have multiple inflows and outflows over their lifespan. This distinction affects the project's risk and complexity, particularly when calculating metrics like net present value (NPV) or internal rate of return (IRR).
As the compounding rate becomes lower and lower the future value of inflows approaches?
As the compounding rate decreases, the future value of inflows approaches the present value of those inflows. This occurs because lower compounding rates result in less growth over time, diminishing the effect of interest accumulation. Ultimately, if the compounding rate were to approach zero, the future value would converge to the total sum of the initial inflows without any interest or growth.
What is initial capital?
a drop cap
What is Georgia's initial?
The answer to what is Georgia's initial is GA, because Georgia is the state and Atlanta is the capital.
Where was the first confederate capital?
Montgomery, Alabama was the initial confederate capital city.
The initial research and development of a business idea is paid for with what capital?
Seed capital
