# Which of the following is a present value method of analyzing capital investment proposals?

## Which method of evaluating capital investment proposals uses present value concepts?

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute an internal rate of return expected from the proposals. A capital expenditures budget summarizes the decisions made for the acquisition of fixed assets for several future years.

## How do you evaluate capital investments?

What are some of the methods for evaluating capital expenditures?

1. Accounting Rate of Return or Return on Investment. This approach looks at the increase in accounting profit compared to the increased investment. …
2. Internal rate of return. This method does consider the time value of money and looks at the cash flows over the entire life of the project. …
3. Net present value.

## What are the four steps of capital investment analysis?

What are the four steps of capital investment analysis: Estimated the expected cash flow, assess the riskiness of those flows, estimate the appropriate opportunity cost of capital, and determine the project’s profitability and breakeven characteristics.

## When analysis of an investment proposal by the net present value method indicates that the present value exceeds the amount to be invested?

An analysis of a proposal by the net present value method indicated that the present value of future cash flows exceeded the amount to be invested.

## Is the time required for net cash flow to equal the initial investment?

The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the: payback period. … The discount rate that makes the net present value of an investment exactly equal to zero is called the: internal rate of return.

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## What are the three steps in investment analysis?

What are the three steps in investment analysis? The three steps in investment analysis are the following: identify the investmentopportunity, find the present value of the future cash flows, and compare the presentvalue of the cash flows to the cost of the investment.

## What are the capital budgeting techniques?

There are a number of capital budgeting techniques available, which include the following:

• Discounted cash flows. …
• Internal rate of return. …
• Constraint analysis. …
• Breakeven analysis. …
• Discounted payback. …
• Accounting rate of return. …
• Real options.

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## What is capital investment decisions?

Capital investment decisions involve the judgments made by a management team in regard to how funds will be spent to procure capital assets. … Whether a projected increase in fixed assets will increase the breakeven point of the business, requiring the firm to generate more sales before it can earn a profit.

## What are the 3 types of capital?

Capital can be held through financial assets or raised from debt or equity financing. Businesses will typically focus on three types of business capital: working capital, equity capital, and debt capital.

## What are the five steps in the capital budgeting process?

The capital budgeting process consists of five steps:

1. Identify and evaluate potential opportunities. The process begins by exploring available opportunities. …
2. Estimate operating and implementation costs. …
3. Estimate cash flow or benefit. …
4. Assess risk. …
5. Implement.