Explain the disadvantages of using the payback method


QUESTIONS :

1. Compare and contrast the internal rate of return (IRR) method from the net present value method (NPV). Which would you prefer to use to evaluate investment opportunities and why?

2. Describe how net present value is used in the financial decision-making process.

3. Explain the disadvantages of using the payback method.

4. Compare and contrast the internal rate of return (IRR) method from the net present value method (NPV).

5. It is true that sunk costs are always irrelevant when considering alternative investment opportunities in the future. Does it follow then that all future costs are relevant when considering two mutually exclusive future opportunities? If yes, why? If no, why not?

6. Explain the effects of sunk costs and opportunity costs in deciding whether to accept a project.

7. Review the financial considerations a company should make before investing in a project.

8. Understand how net working capital, depreciation and interest influence the decision to buy or not to buy.

9. Explain how inflation and interest rates affect the capital budgeting process.

10. Describe how sensitivity analysis might be used to evaluate manage risk regarding a business scenario or investment opportunity.

11. Review the types of assumptions used in sensitivity and scenario analysis.

12. Describe how the options to expand or abandon a project are integrated in the capital budgeting process.

13. Explain how decision trees are used to value investment alternatives.

ANSWER EACH QUESTION IN 200 OR MORE WORDS.

USE CITATIONS AND REFERENCES.

USE APA GUIDELINES PLEASE!!!

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Financial Accounting: Explain the disadvantages of using the payback method
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