Capital Budgeting Measurement Criteria U05a1 Carla Hagood 1. Describe the Net Present Value (NPV) method for determining a capital budgeting project's desirability. What is the acceptance benchmark when using NPV? The NPV determines the monetary increase that can be expected from an investment. It will tell if the return will be above or below the needed amount to complete a project.
(Select the best answer.) (Points : 1) Answer: The value of an investment opportunity you pass up in order to take another investment opportunity 4. What is a volatile investment? (Select the best answer.) (Points : 1) Answer: An investment that can change quickly without warning 5.
Capital Planning, also known as Capital budgeting, (or investment appraisal) is the planning process used to determine whether a firm's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. IRR, Internal Rate of Return helps organizations figure out what the rate of return is on individual projects; what the project earns. This is important to companies as it helps gauge which projects to accept or reject. To accept a project, the IRR is equal to or greater than or equal to the required rate of return.
Question : (TCO 8) When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called 9. Question : (TCO 8) An advantage of using budgeted costs for transfer pricing among divisions is that 10. Question
The biggest area which would provide a direct impact is the reduction of merchandise costs. Total return on assets is stable, at best. Costco should be working toward increasing return on assets, which is a direct reflection of the money going into the organization, but not coming out as a return. Stock holder’s equity is a clear demonstration of this performance. In 2000, it was at 15%, and has decreased in 2008 to 11%, which is actually an increase over prior year.
If you do not have enough money to do certain things you would like to do, then you can use this planning process to prioritise your spending and focus on the money on the things that are most important to you. Once you create your first budget, you can begin to use it and get a good sense for how it can keep your finances on track. Doing this you can easily forecast which months your finances may be tight and which ones you will have extra money. You can then look for ways to even out the highs and lows in your finances so that things can be more manageable. Forecasting your budget gives you an idea how much money you will be able to save for important things like your vacation, a new vehicle, and an emergency savings account.
For these reasons, it is necessary to analyze the competitive advantage of the different options presented. • Strengths and Opportunities: The project evaluation should consider a SWOT analysis of each potential application, which allows identifying the strengths, opportunities, threats and weaknesses. This way, it is possible to choose the best option, which maximized the firm’s strengths and opportunities, while mitigating its threats and weaknesses. • Barrier to Entry: Also it is necessary to analyze the cost of enter to the industry. • Economic Benefit: What will be the earnings associated to the project.. • Customer Preferences Bernstein should recommend to the board the
As it determines the price of the product, and the price based on absorption costing does ensure that all costs are covered. Absorption can provide management with accurate information concerning product cost. The variable method is beneficial by providing an output that is closer to the cash flow of the company that may be short on cash flow. Variable costing aids in the analysis of cost-volume – profit by separating the variable and fixed in the income statement is another benefit. Which method would lead to the best decision when a competitor is submitting a lower bid for your product?
With a debt to equity ratio as above average as Verizon Communications’, the probability that the company will be able to pay off its’ debts if a liquidation was to occur is unlikely. Some factors that may be a contributing factor to Verizon Communications’ currently high debt to equity ratio is the acquisition of other firms, the purchase of complete ownership of Verizon Wireless, and recent deals with Netflix. However, according to macroaxis.com, Verizon Communications’ probability of going bankrupt within the next two years is “less than 46%” (2014). Verizon’s closest competitor, AT&T has about a 43% chance of going bankrupt in the next two years; many of the telecommunications industry companies are within the 43 to 50 percent range of bankruptcy within the next two year (macroaxis.com, 2014). Also, research analyst, Arie Goren, states that “Verizon will continue to benefit from the remarkable leadership of its wireless segment”; he further explains that “Verizon has compelling metrics and good earnings growth prospects”
A more difficult and time consuming effort Huffman could take to reduce exchange rate risk is to spin the rate to your advantage (Prinzel, 2013). This means when USD exchange rates are high, Huffman would need to ensure their customers are aware of the benefits they could be receiving in discounts. Relative to Huffman Trucking’s benefit with this approach, they could buy foreign exchanges when rates are low, similarly taking advantage of the same benefits their customers would