Most firms generate cash inflows every day, not just once at the end of the year. In
Question:
Step by Step Answer:
Daily cash flows would be theoretically best but they would be ...View the full answer
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Corporate Finance questions
-
At the end of every year for 45 years Sabrina invested $500 into her retirement plan. The plan has earned 13% compounded annually over the 45 years. She made the last deposit today. How much money...
-
The inventory shrinkage at the end of the year was understated by $18,500. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the...
-
At the end of the year O'Toole General Hospital, which carries no medical malpractice insurance, had the following list of malpractice claims: 1. Mr. Seymour Green, a heart patient, led a claim for...
-
BT is considering investing in government bonds. The current price of a P100 bond with 10 years to maturity is P88. The bonds have a coupon rate of 6% and repay face value of P100 at the end of the...
-
For several years Fister Links Products has held Microsoft bonds, considered by the company to be securities available-for-sale. The bonds were acquired at a cost of $500,000. At the end of 2018,...
-
1. Was Dr. Dohrmann correct in asserting that it is improper for a court to consider the relative value or adequacy of the consideration? 2. Read Section 14-1e on Illusory promises. Was the...
-
The sun subtends an angle of about \(32 \mathrm{~min}\) of arc ( 0.0093 radians) on Earth. Assuming a mean wavelength of \(550 \mathrm{~nm}\), calculate the coherence diameter and coherence area of...
-
During 2015, Palo Fiero purchases the following property for use in his calendar year-end manufacturing business: Item Date Acquired Cost Manufacturing equipment ............ June 2...
-
Two Firefighter/Paramedics who work on opposite shifts have an ongoing personality conflict. One of the paramedics Bill Jones (a 40 year old Army veteran) has come to the supervisor on several...
-
Amiel Company reported sales revenue of $20.3 million and expenses of $11.1 million in 20X1, excluding the results of its 80%-owned subsidiary, Talia Company. Talia had $7.0 million of sales revenue...
-
Define (a) Simulation analysis, (b) Scenario analysis, and (c) Sensitivity analysis.
-
What are some differences in the analysis for a replacement project versus that for a new expansion project?
-
An article in the Wall Street Journal in 2012 described investors behavior since 2000 as a flight to safety that has led to a high equity risk premium. a. What does flight to safety mean? In this...
-
Compute the convolution sum of the following pairs of sequences: (a) \(x(n)=\left\{\begin{array}{ll}1, & 0 \leq n \leq 4 \\ 0, & \text { otherwise }\end{array} \quad ight.\) and \(\quad h(n)=...
-
A sample of size 64 has standard deviation \(s=3.6\). Approximately how large a sample is needed so that a \(99 \%\) confidence interval will specify the mean to within \(\pm 1.0\) ?
-
Extend the AVL tree implementation discussed in this chapter to support node deletion. In particular, modify the DeleteItem method of the TreeType class and the helper function Delete (originally...
-
Write a Matlab program to plot the samples of the solutions of the difference equations in Exercise 1.9 from \(n=0\) to \(n=20\). Exercise 1.9 Find one solution for each of the difference equations...
-
Suppose we want to process the continuous-time signal \[x_{\mathrm{a}}(t)=3 \cos (2 \pi 1000 t)+7 \sin (2 \pi 1100 t)\] using a discrete-time system. The sampling frequency used is 4000 samples per...
-
Calculate the Fourier series coefficients C n for the following periodic function: B u(x) a A b X
-
A genetically engineered strain of Escherichia coli (E. coli) is used to synthesize human insulin for people suffering from type I diabetes mellitus. In the following simplified reaction scheme,...
-
A wooden object is claimed to have been found in an Egyptian pyramid and is offered for sale to an art museum. Radiocarbon dating of the object reveals a disintegration rate of 10.0 dis min 1 g 1 ....
-
Should depreciation expense be explicitly included in the cash budget? Why or why
-
In his preliminary cash budget, Barnes has assumed that all sales are collected and, thus, that SKI has no bad debts. Is this realistic? If not, how would bad debts be dealt with in a cash budgeting...
-
Barnes cash budget for the entire year, although not given here, is based heavily on his forecast for monthly sales. Sales are expected to be extremely low between May and September but then increase...
-
The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Units to be produced 1st Quarter 2nd Quarter 3rd...
-
You go to the hardware store to buy a new 50 ft garden hose. You find you can choose between hoses of inch and inch inner diameter. Compare the rate at which water flows through the two types of...
-
Miller Company's contribution format income statement for the most recent month is shown below: Sales (32,000 units) Variable expenses Total $ 224,000 128,000 Contribution margin 96,000 Per Unit $...
Study smarter with the SolutionInn App