Question: Why are cash flows rather than profit flows used in the IRR, NPV, and PP methods of investment appraisal?

Why are cash flows rather than profit flows used in the IRR, NPV, and PP methods of investment appraisal?

Step by Step Solution

★★★★★

3.43 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Cash flows are preferred to profit flows because cash is the ultimate measur... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

815-B-F-F-M (7546).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Q:

Why do capital budgeting evaluation methods use cash flows rather than accounting income?

Q:

In discussing your cost accounting class with friends, you explained that you were currently studying methods of evaluating capital investments. You mentioned that most of these methods rely upon...

Q:

Most top executives are graded primarily on their results in terms of net income rather than net cash flow. Why, then, is capital budgeting done with incremental cash flows rather than with...

Q:

S Solutions to these questions can be found in Appendix C . 8.1 Why is the net present value method of investment appraisal considered to be theoretically superior to other methods that are found in...

Q:

Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment appraisal? R-4

Q:

10.4 Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment appraisal?

Q:

8.4 Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment appraisal?

Q:

8.4 Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment appraisal?

Q:

QUESTION 3 Peggy Ltd is a manufacturing company. The managers of the company are considering purchasing new machinery, but they have two options. Since the capital resources are restricted, they can...

Q:

Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment appraisal? AppendixLO1

Q:

Selected unadjusted account balances at December 31, 2014, are shown below for Demron Servicing. Required a. Demron estimates that 1.5% of net credit sales will prove to be uncollectible. Prepare the...

Q:

Ms. Bloggs has total assets of $100,000 of which 25% consists of her house, and 75% is invested in riskless T-bills. The 25% allocation in her house is fixed, because she does not want to sell the...

Q:

2. The seeds of the expansion of the federal governments economic role were sown during the administration of . ( LO1 ) a) Franklin Roosevelt c) Richard Nixon b) Dwight Eisenhower d) Ronald Reagan

Q:

The project you are running has a lot of schedule risk and you know you will need to add contingencies to the schedule baseline. All the following could be considered useful as a reserve except...

Q:

Can you think of three examples of fixed expenses that a business may incur?

Q:

Can you think why it would be unlikely to be double the profit for the first six months?

Q:

Eco-Energy Appliances Ltd started operations on 1 January and has produced the following forecasts for annual sales revenue: The following additional information is also available: 1. Operating...

Q:

Descriptive Statistics NMeanStDevSE Mean95% CI for 25024.0684.6580.295(23.488, 24.648) : population mean of Age of First Marriage, 2004 1.State the sample size, sample mean, and sample standard...

Q:

(Use the information to answer questions #15 to #16) . Consider the following boxplot of some exam scores: TILTTITITITITITT TTTTTT 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99...

Q:

I am just asking for defintions and examples of the following. Please and thank you.