Purchase Solution

criteria to evaluate invemestments

Not what you're looking for?

Ask Custom Question

1.Besides net present value (NPV) and internal rate of return (IRR), what other criteria do companies use to evaluate investments?

2.What are he disadvantages of NPV as in investment criterion
3.How will the change in cost of capital impact the investment decision process?

See attached files.

Attachments
Purchase this Solution
Solution Summary

Different methods to evaluate whether investments should be undertaken

Solution Preview

In addition to NPV and IRR, companies often use the Payback Rule. This Rule is simple to employ, which lends to its popularity. Essentially, it determines whether an investment will earn a return, or at least pay for itself, in a certain amount of time. The Payback Rule lacks

Firms may also use average accounting return (AAR). This is a benefit/cost ratio that produces a pseudo rate of return by dividing the average net income by the average book value. A project is considered acceptable if its AAR return exceeds a target return. However, due to lack of risk adjustment and the use of profits rather than cash flows, this method is seriously flawed.

The profitability index may also be utilized. It is ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • evaluate the fairness of a pay structure

    453587 Describe and evaluate the criteria employees use to evaluate the fairness of a pay structure. Briefly describe and evaluate the criteria employees use to evaluate the fairness of a pay structure.

  • Research methods, Evaluation

    It is not always an easy task to evaluate the work of another. What criteria would you use to decide the merit of this study?

  • Marketing Plan Development and Evaluation

    Assess how an organization could evaluate among alternative plans to see what plan(s) might be approved. Propose the criteria that would be used?

  • Quantitative methods :MCQ

    Decision criteria are the ways to evaluate the choices or decision alternatives faced by decision maker. The criteria can be profits, revenue, cost etc. There can be a single criterion or multiple criteria.

  • Segmenting kids market by hair saloon

    As a marketing consultant for a chain of hair salons, you have been asked to evaluate the kids' market as a potential segment for the chain to target. Evaluate the kids' segment against the four criteria for successful market segmentation.

  • investment criteria

    388969 More than One Investment Criteria Is it ever appropriate to use more than one investment criteria (payback period, average acct. return, internal rate of return, profitability index, net present value) to evaluate a project. Explain.

  • A program evaluation is the systematic examination of any ac

    Some have stated these three evaluation criteria do not adequately evaluate the success of a government program.

  • Important Information about Scientific Theories

    There are four major criteria that are used to evaluate theories: 1. Explains the past; predicts the future 2. Testable and falsifiable 3. Parsimonious 4.

  • Criteria to Evaluate 4PLs

    177390 What criteria might (potential) customers use to evaluate possible 4PLs? 1. What criteria might (potential) customers use to evaluate possible 4PLs? Click on the link to see the case.

  • Alignment and Social Change

    Consider, for example, what criteria are used in your discipline to evaluate alignment of research components.

View More Related Solutions