Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present v

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899604
Joined: Mon Aug 02, 2021 8:13 am

Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present v

Post by answerhappygod »

Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present value of this proposal is greater than zero and the firm is not under the constraint of capital rationing, then the firm should:

A. calculate the IRR of this investment to be certain that the IRR is greater than the cost of capital
B. Compare the profitability index of the investment to those of other possible investments
C. Calculate the payback period to make certain that the initial cash outlay can be recovered within an appropriate period of time
D. Accept the proposal, since the acceptance of value-creating investments should increase shareholder wealth
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!

This topic has 1 reply

You must be a registered member and logged in to view the replies in this topic.


Register Login
 
Post Reply