Which of the following best describes the process of capital budgeting? a Forecasting revenues and expenses hmiting funds for capital improvements without considering the profitability of proposed prot determining a companys short term goals d. determinung the amount to spend on fixed assets and which fixed assets to purchase

Which of the following best describes the process of capital budgeting? a Forecasting revenues and expenses hmiting funds for capital improvements without considering the profitability of proposed prot determining a companys short term goals d. determinung the amount to spend on fixed assets and which fixed assets to purchase

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter16: Country Risk Analysis

Section: Chapter Questions

Problem 9QA

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Why are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?
To make a capital investment decision, a manager must a. estimate the quantity and timing of cash flows. b. assess the risk of the investment. c. consider the impact of the investment on the firms profits. d. choose a decision criterion to assess viability of the investment (such as payback period or NPV). e. All of these.
Define each of the following terms: Operating plan; financial plan Spontaneous liabilities; profit margin; payout ratio Additional funds needed (AFN); AFN equation; capital intensity ratio; self-supporting growth rate Forecasted financial statement approach using percentage of sales Excess capacity; lumpy assets; economies of scale Full capacity sales; target fixed assets to sales ratio; required level of fixed assets
In proper capital budgeting analysis we evaluate incremental __________ cash flows. Select one: a. accounting b. operating c. before-tax d. financing
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How is the payback period used in capital budgeting? Multiple Choice As a measure of a project's risk To determine the amount of funds that will be required in the future To measure the relationship between the project's return and the company's cost of capital None of the above
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The duration of time within which the investment made for the project will be recovered by the net returns of the project is known as а. Accounting rate of return method b. Payback period С. Net present value method d. Period of return Capital budgeting is the process of evaluating and selecting short-term investments that are consistent with the firm's goal of maximizing owners' wealth. Select one: True False
1. Taking into consideration all the information given, determinethe Net Present Value of the project and advice the company onwhether to invest in the new line of product. 2. Why should the cost of capital used in capital budgeting becalculated as a weighted average of the capital component ratherthan the cost of the specific financing used to fund a particularproject?
Capital budgeting is the ________. A. process of planning for investments in long−term assets B. process of evaluating the profitability of a business C. process of making pricing decisions for products D. preparation of the budget for operating expenses