Question

In: Finance

“how do we accept or reject a project based on financial factors?” What is the role...

“how do we accept or reject a project based on financial factors?”
What is the role of depreciation in giving an answer to the above question? Please type you answer in less than 500 words.

related to class - IE 370  ENGR. ECONOMIC ANALYSIS

Solutions

Expert Solution

We will accept or reject a project which will be based upon the financial factor by analysing the return which are generated by the project and comparing with the cost of the capital.

We will be trying to find out the cash flows associated with the project and we will try to discount the cash flows that the present value in order to find out the net present value of those cash amounts and we will be trying to adopt the various kinds of capital budgeting decisions like net present value or internal rate of return in order to find out whether the project has adequate criteria to get accepted or not so I will be trying to to compare the rate of return by these projects with the cost of capital related to this project and then if there is a differential on the positive side then it will mean that these projects are going to help the company in growing in the long run so I will be selecting those projects because they will be having positive net present value and they will be having a higher rate of return than the cost of capital.

Role of depreciation will also be ascertained in finding out the cash flows because the cash flows are never considering depreciation in overall criteria but when we will be selecting the project based upon their features we will be trying to discount the depreciation also because it is also a cost related to those assets but this cost should not be treated with the utmost priority because this is not a cash outflow related to those projects and it is also tax exempted in nature so I will be trying to factor in accordingly and then accept these products according to tthe rate of return after comparing them to the cost of capital

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

How do we determine if we reject or fail to reject a null hypothesis? What are...
How do we determine if we reject or fail to reject a null hypothesis? What are the key pieces needed when writing a conclusion?
How do we determine if we reject or fail to reject a null hypothesis? What are...
How do we determine if we reject or fail to reject a null hypothesis? What are the key pieces needed when writing a conclusion?
Calculate the NPV for Project A and accept or reject the project with the cash flows...
Calculate the NPV for Project A and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 7% Project A Time 0 1 2 3 4 5 Cash Flow -990 350 480 500 630 120 2) Calculate the NPV for project L and recommend whether the company should accept or reject the project. Cost of Capital is 6% Project L Time 0 1 2 3 4 5 Cash Flow -         8,600          ...
You are trying to decide whether to accept or reject a project. The project will generate...
You are trying to decide whether to accept or reject a project. The project will generate a cash flow of $15,000 in year one; $25,000 in year two; $20,000 in year three; and $4,000 in year four. The project costs $40,000 initially. The firm has a weighted average cost of capital of 8%. Your firm generally accepts projects that payback in three years or less. What is the discounted payback of the project? Should you accept or reject the project?
How do you write a letter to directors advising them whether to accept or reject an...
How do you write a letter to directors advising them whether to accept or reject an investment?
As a general rule, if using the Profitability Index as a guide to accept/reject a project,...
As a general rule, if using the Profitability Index as a guide to accept/reject a project, you should accept the project if the Profitability Index is             a equal to 0             b greater than 0             c greater than 1             d greater than the IRR
Python Write a program that will analyse the string input and print “accept” or “reject” based...
Python Write a program that will analyse the string input and print “accept” or “reject” based on the pattern given Accept if it fulfils the following conditions -String length 9 -3 small alphabet (3 lowercase letter) -3 digits -3 big alphabet (3 uppercase letters) -1st alphabet should be a capital -Last alphabet should be a number -Two consecutive alphabets can't be small Reject if any of the conditions is absent So i want it to accept or reject my input,...
How can we improve the results of the project when we fail to reject the null...
How can we improve the results of the project when we fail to reject the null hypothesis?
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10%. Time 0 1 2 3 4 5 Cash Flow -250 75 0 100 75 50 a) 2.41, accept b) 0.023, reject c) 0.90, reject d) 1.97, accept
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent. Time: 0, 1, 2, 3, 4, 5 Cash Flow: -82, -82, 0, 117, 92, 67 Time: 0 1 2 3 4 5 Cash flow: -82 -82 0 117 92 67 Multiple Choice 48.17 percent, reject 8.00 percent, accept 58.74 percent, accept 47.21 percent, reject All information is...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT