Answer:
Project A is more valuable than Project B given a positive discount rate.
Explanation:
Let us assume the Discount Rate be r and cash flow for year n be CFn
Also
Let us assume initial Investment be X
So,
NPV = ΣCFn ÷ (1+r)^n
NPVA = - X + 6500 ÷ (1 + r) + 4500 ÷ (1+r)^2 + 2500 ÷ (1+r)^3
NPVB = - X + 2500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 6500 ÷ (1+r)^3
NPVA - NPVB = - X + 6500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 2500 ÷ (1+r)^3 - (- X + 2500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 6500 ÷ (1+r)^3)
= 4000 ÷ (1+r) - 4000 ÷ (1+r)^3 = 4000(1 ÷ (1+r) - 1 ÷ (1+r)^3)
In the case when
Ir > 0, 1 ÷ (1+r) > 1 ÷ (1+r)^3
So,
NPVA - NPVB > 0 => NPVA > NPVB
Answer:
Banks provide business-specific financial services that help business owners manage their money. In addition to basic checking account services that allow business owners to deposit funds and write checks, they may also allow businesses to transfer money by Automated Clearing House (ACH) and wire
Answer: A. He will quite certainly gain approval since the project has a positive net present value.
Explanation:
The options are:
A. He will quite certainly gain approval since the project has a positive net present value.
B. Approval is probable but not likely as he failed to account for the time value of money.
C. He will not gain approval as he failed to consider whether the project is leading edge or not.
D. Approval is probable but not likely as the project has been constructed on estimates instead of facts.
Capital budgeting is used to know whether the long term investment for a particular organization's is actually worth investing in or not by the company.
Based on the scenario in the question, since the present value of the estimated future cash flows is greater than the cost of the project, Ashton will quite certainly gain approval since the project has a positive net present value.
<span>Innovation is the introduction of something new, such as a new device, idea, or method of doing something. Therefore, an innovative idea is something that could lead to a new feature or capability to better an existing product. A company such as Apple is known for it's innovative products.</span>