Answer:
Multiple IRRs:
Said another way, Multiple IRRs occur when a project has more than one <em>internal rate of return.</em> The problem arises where a project has non-normal cash flow (non-conventional cash flow pattern).
Internal rate of return (IRR) is one of the most commonly used capital budgeting tools. Investors make decisions by comparing the IRR of the project under consideration with the <em>hurdle rate</em>. If the IRR is greater than the hurdle rate, the project is accepted, otherwise it is rejected. When there are more than two IRRs, it is not exactly clear which IRR to compare with the hurdle rate.
Hurdle rate is the minimum required rate of return which businesses use as a benchmark to decide whether to invest in a project or not.
<em>So a typical situation which can generate negative cashflows which can in turn lead to multiple IRRs towards the end of the project is where the conditions of investment become adverse towards the end of the project.</em>
Imagine that toward the end of the lifecycle of a project, a forecasted increase external costs such as Interest Rate, influenced by government policies translates to an erosion of the bottom line generated by the business in that year.
Period 0 1 3 3 4 5
Unconventional cash flows ($)-19,000 16,000 16,000 6,000 6,000 -52,000
The series is non-conventional cash-flow pattern, which has two sign changes. This is the range in which the net present value of the non-conventional cash flow series is positive. The multiple IRR problem poses a series problem to analysts because the decision is not obvious.
Cheers!
Answer:
at the end
Explanation:
Adjusting entries are made at the end of an accounting period after a trial balance is prepared to adjust the revenues and expenses for the period in which they occurred.
Answer:
This business idea worth $430,127 today
Explanation:
Today value of the future cash flows can be calculated by discounting the cash flows on the given discount rate. It is called the present value and sum of present value of all cash flows is called Net present value.
We use following format to calculate NPV for the given business idea
Years 1 2 3
Cash Flows $5,600 $48,200 $125,000
Sale Proceeds $450,000
Net Cash Flows $5,600 $48,200 $575,000
Discount Factor 14% 0.8772 0.7695 0.6750
Present values $4,912.32 $37,089.9 $388,125
Net present value of business idea = $4,912.32 + $37,089.9 + $388,125
NPV = 430,127.22
Answer:
Capability ratio = 1.04166
Explanation:
Given:
Length of a shoe (not deviate) = 1 mm
Standard deviation of this length = 0.32 mm
Number of standard deviations = 3
Find:
Capability ratio = ?
Computation:
Capability ratio = [Length of a shoe (not deviate) / Standard deviation of this length] / Number of standard deviations
Capability ratio = [1 / 0.32] / 3
Capability ratio = 3.125 / 3
Capability ratio = 1.04166
Capability ratio is greater than 1, therefore process is capable.
Answer:
D
Explanation:
D because you have to keep up with demand
