What role does the human element play in the capital budgeting decision process? Could it cause a
Question:
Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
Step by Step Answer:
Managers tend to be favorably biased toward projects stemmi...View the full answer
Introduction to Corporate Finance
ISBN: 978-0324657937
2nd edition
Authors: Scott B. Smart, William L Megginson
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
-
What role does the human resources element of the customer service environment play in customer satisfaction?
-
What role does the project manager have related to ethical behavior on the team? What steps can be taken to help ensure a high level of ethical behavior? Describe a situation in which you were...
-
What is the ABC system? What role does the EOQ model play in controlling inventory? How does it capture the opportunity costs associated with inventory investment?
-
Compare two versions of the two-period depletable resource model that differ only in the treatment of marginal extraction cost. Assume that in the second version the constant marginal extraction cost...
-
What are the primary functions of GNMA? What is timing insurance?
-
Picture Perfect Solutions reported a tax loss carryforward of $995,000. Two companies are interested in acquiring Picture Perfect Solutions for the amount of the tax loss. Photo Emporium has a cost...
-
Various types of attachments can be used with the shop vac shown in Video V5.2. Two such attachments are shown in Fig. P5.20-a nozzle and a brush. The flowrate is \(1 \mathrm{ft}^{3} / \mathrm{s}\)....
-
Bavarian Crystal Works designs and produces lead crystal wine decanters for export to international markets. The production manager of Bavarian Crystal Works estimates total and marginal production...
-
1. Write a paragraph about the "Fermi Paradox". 2. Define the Megawatt, Gigawatt and Terawatt units of power. Access the internet to determine the latest available figure of total global power...
-
Suppose that the evolving star is the same size as our Sun at the start of the animation. The white dwarf, meanwhile, is only about as large as the Eartheven though it may have two-thirds or...
-
Can you articulate circumstances under which the cost of excess capacity is zero? Think about why the cost of excess capacity normally is not zero.
-
Why do we consider changes in net working capital associated with a project to be cash inflows or out-flow rather than consider the absolute level of net working capital?
-
The monthly revenue R achieved by selling x wristwatches is figured to be R(x) = 75x 0.2x 2 .The monthly cost C of selling x wristwatches is C(x) = 32x + 1750. (a) How many wristwatches must the...
-
A portable generator is needed at a remote construction site. Two alternatives are being considered. Their annual fixed costs and operating and maintenance costs per hour are shown in the table...
-
The Fence Company is setting up a new production line to create top rails. The relevant data for two alternatives are shown below. a. Based on MARR of 8 percent, determine the annual rate of...
-
Cowboy Metal Cutting produces a laser-cut part based on customer orders. The number of units requested on a customers order for the laser-cut part can vary from 1 to 150. Cowboy has determined that...
-
A utility is submitting their petition to their regulatory agency to justify rates for the upcoming year. Their proposal is based upon revenue requirements. The company has 45 percent of their...
-
Prove that, for any \(\lambda \in \mathbb{C},\left(e^{-\lambda^{2} t / 2} \cosh \left(\lambda W_{t} ight), t \geq 0 ight)\) is a martingale.
-
Pedro and Anna plan to form the PA LLC by the end of 2022 to produce and sell specialty athletic apparel. Pedro and Anna will both serve as member-managers of the LLC and will be active in its...
-
Match each of the key terms with the definition that best fits it. _______________ A record of the sequence of data entries and the date of those entries. Here are the key terms from the chapter. The...
-
A long water trough of triangular cross section is formed from two planks as is shown in Fig. P3.102. A gap of 0.1 in. remains at the junction of the two planks. If the water depth initially was \(2...
-
If the NPV of a project is $5,090 and its after-tax initial investment is $10,050, what is its PI? Should the firm accept the project? Does the PI yield the same decision as the NPV?
-
SK Inc. has two projects as follows: If SK set 2.6 years as a cut-off period for screening projects, which projects will be selected, using the payback periodmethod? Project Initial CF CF CF CF CF...
-
Which project(s) will be selected if the company uses the discounted payback period method in Practice Problem 32 and the discount rate is 12 percent?
-
EnviroSpecialists is an environmental engineering company that provides assessments of the effect of new construction and proposed development on the surrounding landscape. Customers include large...
-
Discuss the impact of cross-cultural allusions in global literature, particularly in terms of fostering understanding and dialogue between diverse communities
-
The correct entry should be Debit: Armstrong, Capital $48,000 Credit: Cash $58,000 Debit: Jackson, Capital $5,000 Debit: Tanner, Capital $5,000
Study smarter with the SolutionInn App