Question

In: Finance

Which of the following decision model takes into account of all the cash flows of a...

Which of the following decision model takes into account of all the cash flows of a project.

Payback period

Discounted payback period

Profitability index

None

The discount rate that is used for calculating the present values of a project's cash flows is the rate of return on other investments, which have lower risk than that of the project.

True

False

Variance of an investment's returns shows the exact percentage of the investment's risk.

True

False

Solutions

Expert Solution

Which of the following decision model takes into account of all the cash flows of a project.

Profitability Index takes into account all the cash flows of a project while payback period and discounted payback period considers only those cash flows until a certain payback period is obtained.

The discount rate that is used for calculating the present values of a project's cash flows is the rate of return on other investments, which have lower risk than that of the project.

FALSE

The discount rate that is used for calculating the present values of a project's cash flows is the rate of return on this particular investment, which compensates for the riskiness in the cash flows.

Variance of an investment's returns shows the exact percentage of the investment's risk.

FALSE

Variance is just a statistical measure of the risk in the investment. It is not an exact measure of risk.

Can you please upvote? Thank you :-)

jeff jeffy answered 1 year ago
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