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15
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What is the primary limitation of the Payback Period method?
) It does not account for cash flows after the payback period
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15
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What does sensitivity analysis help investors understand?
The effect of changes in key assumptions on investment outcomes
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Which capital budgeting method is expressed as a ratio of discounted cash inflows to initial investment
Profitability Index
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Which method focuses on the time it takes to recover an initial investment
Payback period
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What is the primary goal of capital budgeting
Maximizing shareholder value
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lifesaver
Give 20 points!
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magnet
Take 15 points!
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shark
Other team loses 15 points!
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thief
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15
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Capital budgeting involves…………..
Analyzing the costs,risks, potential returns
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A budget is…….
financial plan that outlines expected revenues and expenditures over a specific period, usually a Year
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seesaw
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fairy
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rocket
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lifesaver
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Which method provides the most accurate measure of an investment’s profitability?
Net Present VALUE
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25
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What does IRR stand for?
Internal Rate of Return
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Which method calculates the present value of future cash flows?
Present Value
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What does NPV stand for?
Net Present Value
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monster
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star
Double points!
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rocket
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thief
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What does a positive NPV indicate?
The investment is risky
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The discount rate used in NPV calculations typically reflects:
The firm’s cost of capital
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