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The cost of capital is the minimum return a project has to earn in order for it to be accepted True or False?
Mhcarabello
true
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∙ 13y ago
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Is the method of determining the minimum sales volume needed at a certain price level to cover all costs return on sales?
breakeven analysis
Midwest Water Works estimates that its WACC is 10.5 percent . The company is considering?
Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Project Size Rate of Return A $1 million 12.0% B 2 million 11.5% C 2 million 11.2% D 2 million 11.0% E 1 million 10.7% F 1 million 10.3% G 1 million 10.2% Assume that each of these projects is just as risky as the firm's existing assets, and the firm may accept all the projects or only some of them. Which set of projects should be accepted?
Almendarez Corporation is considering the purchase of a machine that would cost 320000 and would last for 7 years At the end of 7 years?
Almendarez Corporation is considering the purchase of a machine that would cost $320,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $51,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $72,000. The company requires a minimum pretax return of 18% on all investment projects. The net present value of the proposed project is closest to: Best answer is available on onlinesolutionproviders.com thanks
What happens to the quick return ratio when the stroke length is reduced?
What happens to the quick return ratio when the stroke length is reduced?
What is the frequency of first tranche return?
Type your answer here... weekly
What is minimum rate of return?
It is the lowest return on project or investment that will make the firm or investor to accept that project.
What is minimum attractive rate of return?
It is the lowest return on project or investment that will make the firm or investor to accept that project.
What happens if the IRR is greater than the required rate of return?
The IRR rule states that if the internal rate of return (IRR) on a project or investment is greater than the minimum required rate of return - the cost of capital - then the decision would generally be to go ahead with it. Conversely, if the IRR on a project or investment is lower than the cost of capital, then the best course of action may be to reject it.
When a corporation weighs its return on investment for initiating a new project against the minimum standard investment return it has set before it the minimum standard investment return is referred t?
Hurdle rate
How would you describe the cost of capital?
The minimum rate of return the company must earn to be willing to make the investment. It is the rate of return the company could earn if, rather than making the capital investment, it invested the money in an alternative, but comparable, investment.
What is the difference between return on capital and return on investment?
return on capital = earnings before interest and tax / capital employed * 100
Weakness of the internal rate of return approach is that?
it implicitly assumes that the firm is able to reinvest the interim cash flows from a project at the firm's cost of capital
What are the principal objections to the average rate of return method in evalueting capital investment proposals?
The rate of return on capital investment is the amount of money earned on an original investment. The objection to the standard rate of return is the restriction in accessing increase or leaving the project. There is also a fear that documented gain and financial increase is not always represent real money.
How do you calculate minimum Required Rate of Return?
The minimum required rate of return, also known as the hurdle rate or cost of capital, can be calculated using the weighted average cost of capital (WACC) formula. The WACC is the weighted average of the cost of equity and the cost of debt, taking into account the proportion of each in a company's capital structure. The formula for WACC is: WACC = (E/V) * Re + (D/V) * Rd * (1 - T), where E is the market value of equity, V is the total market value of equity and debt, Re is the cost of equity, D is the market value of debt, Rd is the cost of debt, and T is the tax rate.
How do you calculate return on capital?
The way to calculate the Return on Capital (ROC) or Return on Investment (ROI) is dividing net earning between the total capital. The result is multiplied by 100, and you get the percentage.
What is the remuneration of capital?
It is similar to Return on capital employed (ROCE).
Suppose a firm estimates its cost of capital for the coming year to be 10 What are the reasonable cost of capital for an average risk project high risk and low risk?
In order to determine reasonable costs of capital for average, high and low risk projects the firm should develop risk-adjusted costs of capital for each category of risk based on the concept of divisional WACC. If a firm estimates that its cost of capital for the coming year will be 10%, the firm should use 10% as the basis for its average risk projects since the firm will need to achieve a minimum of a 10% return on all its projects. Typically, a high-risk project has the potential for higher returns and a low-risk project will typically yield lower returns. Therefore, the firm could set the cost of capital for its high-risk projects at 12% and the cost of capital for low risk projects at 8%. Since the average risk project has a 10% cost of capital, the overall risk of the firms projects will be equal to the 10% cost of capital. Similarly, if the firm's high-risk projects are particularly risky, they could be set at a 15% cost of capital and the low-risk projects will be adjusted down to a 5% cost of capital. The ultimate goal is that the portfolio of the firm's projects will achieve the required 10% return or greater so that the cost of capital to fund the projects is covered. The assignment of risk is somewhat subjective but it is better than not adjusting the risk at all.
