User Account

All Pages

Describe the six models of a capital budgeting decision

Assignment Help Finance Basics
Reference no: EM133071607

To support growth strategies and combat competition with rivals, businesses seek external capital to further develop products and services in hopes to create new sales opportunities. Since capital investment often involves a huge money investment, longer time engagement and risks of uncertainties, any decision shall not be taken lightly and shall be carefully evaluated before putting money to start a long-term project. The goal is to ultimately make the right accept/reject decision.

Briefly describe (not define) the six models of a capital budgeting decision, which are typically defined as a 'go or no-go' decision. These are -

1. Payback period (standard)

2. Discounted payback period (modified from payback period)

3. Net present value (NPV) (standard)

4. Internal rate of return (IRR) (standard)

5. Modified internal rate of return (MIRR) (modified from IRR)

6. Profitability index (PI) (modified from NPV)

In reviewing these, which one(s) is appropriate for small projects and which one(s) is appropriate for larger projects? Why?

Please choose one of these models and provide an example by showing the model's calculation in actio

Reference no: EM133071607

Questions Cloud

What is the monthly prepayment rate : A current mortgage pool described by a 50 PSA would have an annual prepayment of 1% after 10 months, what is the monthly prepayment rate?
Is this advice consistent with the basic m-v model : Financial advisors generally recommend that their clients allocate more to higher risk-return asset classes (like equities) if their investment horizons are lon
What the contribution margin per the constrained : Rough Stuff makes 2 products: khaki shorts and khaki pants for men. What the contribution margin per the constrained resource for khaki pants
Bsp defined interest rates to be a type of price : BSP defined interest rates to be a type of price. Interest are set to compensate the risk of allowing the finances to flow into the financial system.
Describe the six models of a capital budgeting decision : To support growth strategies and combat competition with rivals, businesses seek external capital to further develop products and services in hopes to create ne
China and united states of america : There is an ongoing trade war between China and United States of America. (US)
Estimate company maximum expected loss : Assume that you work for a company that estimates its net cash ?ows next quarter from Morocco will be $9,000,000USD (i.e._, after converting from MAD to USD) an
Prepare instalment payment schedule for the first two year : Payments are due on December 31 and June 30. The company's year-end is June 30. Prepare an instalment payment schedule for the first two years
Values-driven health communication : You are living in an era when dramatic changes are occurring in our health care system. Read "Health Sciences Discussion Philosophy" before beginning discussion

Reviews

Write a Review

Finance Basics Questions & Answers

  Significance of the efficient market hypothesis

What is the significance of the efficient market hypothesis for the financial manager?

  What risk-adjusted discount rate

If ABC Mining is to be indifferent between the two processes, what risk-adjusted discount rate must be used to evaluate B?

  Define importance the amount and the percentage change

Two profitable companies in the same industry have similar total stockholders' equity. However, one company has most of its equity balance in common stock.

  Organization structure-directing initiates actions

Planning and organizing lay the foundation for the organization structure while directing initiates actions. Comment upon this statement.

  What is the tax equivalent yield

What is the tax equivalent yield of a 10 year general obligation bond issued by the City of Burlington with a coupon of 4.5% if the assumed marginal tax rate is 40%?

  Firm a is acquiring firm b by exchanging 100 of its shares

consider the following information for two all equity firms a and bfirm afirm btotal earnings30001100shares

  Components of gross national product

What are the components of Gross National Product (GNP)? How does it understate aggregate production in Third World countries where substantial economic production may be consumed directly and thus not reach markets where it can be measured?

  What is the average annual rate of return

Today, that investment is worth $430,065.11. What is the average annual rate of return she earned on this investment?

  Npv on project-riggs corp

Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $286,333 over the next three years. If the discount rate is 17.5 percent, what is the NPV on th..

  How many payments will you have made

How many payments will you have made when your account balance reaches $21,334? (Do not round your intermediate calculations.)

  Examine and evaluate the disparity

Examine and evaluate the disparity of your state's budget allocation for education and property tax to the various localities.

  Evaluate efficiency of two common inventory control systems

Evaluate the efficiency of two common inventory control systems. Determine ways in which they provide a firm with a competitive advantage in the marketplace.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd