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WITCHER [35]
3 years ago
8

A given investment project will cost RM400,000. Incremental annual cash flows after taxes are expected to be RM80,000 per year f

or the life of the investment, which is 5 years. There will be no salvage value at the end of the 5 years. The required rate of return is 14%. On the basis of the profitability index method, should the investment be accepted?
Business
1 answer:
erastova [34]3 years ago
6 0

Answer:

Based on the profitability index method, the investment should not be accepted.

It does not produce enough cash flows to justify the investment.

Explanation:

The profitability index method measures the present value of benefits for by dividing the present value of benefits by the present of initial investments.

The present value of initial investment in this project remains RM400,000.  The present value of incremental annual cash flows of RM80,000 after taxes for 5 years will be equal to:

RM80,000 * 3.668 = RM293,440

Then the next step is to divide the present value of benefits by the initial investment as follows:

RM293,440/RM400,000 = 0.7336 = 73.36%

The implication is that the present value of the benefits is less than the initial investment costs.  The project should then be rejected.

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Which is not a reason for supporting ethical relativism?
raketka [301]

This is not the reason why not support ethical relativism; Ethical relativism holds that there is a right and wrong, even though we do not agree about what is right and wrong and If people disagree about some moral matter, their disagreement will always be due to their having different moral values.

4 0
3 years ago
Projects often include indirect costs that are necessary to keep the organization running, but are not associated with one speci
Sedbober [7]

Answer:

The correct answer is:

executive salaries, utilities and insurance (C.)

Explanation:

Indirect costs are  costs that are not directly attributable objectively to a good, project, facility or service. Indirect costs are either fixed or variable. Fixed indirect costs are costs that do not change as the units/volumes of production  change, while variable indirect costs are costs that change with change in production units. Indirect cost can also be classified as either recurring or fixed. Recurring indirect costs are those that are repeated in nature, example is salaries of laborers, while fixed indirect can be cost of transportation. In this example, executive salaries, utilities and insurance are not directly attributable to a specific project at hand; the executives do not partake in the project hands-on, insurance and utilities such as electricity rent are not project-specific and it is financially infeasible to do so.

On the other hand, direct costs are costs that are directly attributable to the object, and it is financially feasible to do so, hence travel cost, labor, consultant and subcontractors costs, and material costs are all directly linked to the project (object).

3 0
3 years ago
Ivanhoe Company issued $492,000 of 10%, 20-year bonds on January 1, 2017, at 104. Interest is payable semiannually on July 1 and
mamaluj [8]

Answer:

Explanation:

For  answer , see the attached file.

Download docx
5 0
2 years ago
Electricity for All (EFA) is preparing for their Initial Public Equity Offering (IPO). Being in a highly regulated industry, and
kirza4 [7]

Answer:

the dividend per share is $18.85 per share

Explanation:

The computation of the dividend per share is shown below:

We now that

price per share = Dividend ÷ (required rate of return - growth rate)

$145 = Dividend ÷ (13% - 0%)

So, the dividend is

= $145 × 13%

= $18.85 per share

Hence, the dividend per share is $18.85 per share

3 0
2 years ago
Which of the following statements is most correct concerning a project with normal cash flows (i.e., a cash outflow in Year 0 fo
Bond [772]

Answer: D. If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.

Explanation:

Net present value (NPV) refers to the difference that exist between the present value of the cash inflows and that of the cash outflows for a particular period of time.

The net present value is used in capital budgeting to determine if a projected investment or project will be profitable or not. For a project with normal cash flows, if the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.

Therefore, the correct option is D.

7 0
2 years ago
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