What is the reinvestment assumption, and how does the assumption affect capital investment analyses?
What will be an ideal response?
Answers will vary.
The reinvestment assumption is that cash inflows from a capital project are reinvested at the required rate of return. This assumption is implied in capital investment methods that take the time value of money into account - net present value and internal rate of return methods. If cash inflows cannot be reinvested at the required rate of return, the project would not achieve the expected rate of return.
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How does product location impact labor-related factors?
What will be an ideal response?
Bob and April own a house at the beach. The house was rented to unrelated parties for eight weeks during the year. April and the children used the house 12 days for their vacation during the year. After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows: Gross rental income $4,000 Less: Mortgage interest and property taxes$3,500 Other allocated expenses 2,000 (5,500) Net rental loss ($1,500) ? What is the correct treatment of the rental income and expenses on Bob and April’s joint income tax return for the current year assuming the IRS approach is used if applicable?
A. A $1,500 loss should be reported. B. Only the mortgage interest and property taxes should be deducted. C. Since the house was used more than 10 days personally by Bob and April, the rental expenses (other than mortgage interest and property taxes) are limited to the gross rental income in excess of deductions for interest and taxes allocated to the rental use. D. Since the house was used less than 50% personally by Bob and April, all expenses allocated to personal use may be deducted. E. Bob and April should include none of the rental income or expenses related to the beach house in their current year income tax return.
Some of the elements of a contract are acceptance, consideration, legality, and capacity.
Answer the following statement true (T) or false (F)
Vironi Mave, a designer clothing company, wants to hire fashion designers to start a new clothing line for men. To obtain funds for the project, Vironi Mave issues several formal IOUs to sell them to its investors, with a maturation period of ten years. Which of the following sources of long-term funds is being used by Vironi Mave in the given scenario?
A. Commercial paper B. Term loans C. Direct investments from owners D. Corporate bonds