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What method of evaluating capital investment proposals uses the concept of present value to compute rate of return?
The present value method of analyzing capital investment proposals involves the discounting of future cash flows provided by the investment using the the opportunity cost of capital, or weighted average cost of capital. By discounting the cash flows, you are then able to compare the initial investment with the future cash flows in present value terms. When the sum of future cash flows provide a premium to the initial investment, the net present value becomes greater than zero, and the capital investment should be considered. On the other hand, if the initial investment exceeds the sum of future cash flows, the net present value of the project is less than zero and should be discarded.
How do you compute capital gains tax?
To compute capital gains tax, subtract the original purchase price of an asset from the selling price to determine the capital gain. Then, apply the capital gains tax rate to the gain to calculate the tax owed.
How do you compute marginal cost of capital?
Take the first-order derivative of the cost of capital function.
How will you compute the cost of debt capital?
we keyin the credit then we take out the debit.?
The Guillermo furniture store scenario Compute the return on investment residual income and economic value added for the current situation?
The Guillermo furniture store scenario Compute the return on investment residual income and economic value added for the current situation?
What is the benefit of taxes when calculating depreciation into a cash flow projection?
Depreciation itself does not affect cash flow. After all, depreciation is a noncash entry that reflects the reduction in value of a long-lived asset. It has no direct cash flow effects. However, because depreciation is tax-deductible, it can reduce a company's tax provision. Therefore, to the extent that depreciation reduces taxes, it provides a cash flow benefit. To compute the benefit in any given year, multiply the Modified Accelerated Cost Recovery System (MACRS) depreciation on the asset by the company's marginal tax rate.
How do you compute the Marginal Cost of Capital schedule?
Marginal or incremental cost of capital is cost of the additional capital raised in a given period
How compute cost of debt for WACC of a 5y project for company that has NO access to long-term debt markets?
1. If company has no access to long term debt as a source of capital then weighted average cost of capital will only include the rate of equity as a WACC for discounting long term projects as firm has not a mix of debt and equity to finance its investment projects
In a paragraph when you say First do you have to put a capital letter after?
No. It's not necessary. Example: First, compute for the greatest coefficient.
What is Use of acquisition cost less depreciation in valuing an asset on the balance sheet?
the term "cost less depreciation" on a Balance Sheet, means the Cost - of the asset when purchased or installed, including all costs related to acquisition less - minus the total value of Depreciation to the date of the Balance Sheet. It is used to compute the net value of the asset for the benefit of the share holders of the company or for the actual value of the item, if it is being purchased.Joe
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.
How to compute cost to be capitalized for acqusition of assets?
The cost to be capital its depend upon the company policy whether they should capitalze the cost or not.
