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Financial Feasibility Analysis Quiz

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Questions and Answers

What is the formula for calculating the Simple Payback period (PP)?

$PP = TOTAL hinspace INVESTMENT hinspace COST - AVE. hinspace ANNUAL hinspace NET hinspace REVENUE$

$PP = \frac{TOTAL hinspace INVESTMENT hinspace COST}{AVE. hinspace ANNUAL hinspace NET hinspace REVENUE}$ (correct)

$PP = TOTAL hinspace INVESTMENT hinspace COST + AVE. hinspace ANNUAL hinspace NET hinspace REVENUE$

$PP = \frac{TOTAL hinspace INVESTMENT hinspace COST}{NET hinspace REVENUE}$

What does the Net Present Value (NPV) formula represent?

$NPV = \frac{sum hinspace of hinspace revenue - sum hinspace of hinspace cost}{(1+i)^n}$ (correct)

$NPV = sum hinspace of hinspace revenue - sum hinspace of hinspace cost$

$NPV = NET hinspace REVENUE - (1+i)^n$

$NPV = \frac{NET hinspace REVENUE}{(1+i)^n}$

What is the Return on Investment (ROI) formula?

$ROI = \frac{net hinspace revenue}{total hinspace investment hinspace cost}$ (correct)

$ROI = \frac{total hinspace investment hinspace cost}{net hinspace revenue}$

$ROI = net hinspace revenue - total hinspace investment hinspace cost$

$ROI = net hinspace revenue \times total hinspace investment hinspace cost$

What does Internal Rate of Return (IRR) represent?

<p>Rate of increase of investment</p> Signup and view all the answers

What is the purpose of preparing a cash flow table in financial feasibility analysis?

<p>To track production inputs, outputs, revenues, costs, and net revenues</p> Signup and view all the answers

Study Notes

Capital Budgeting Formulas

The Simple Payback Period (PP) formula calculates the number of years it takes to recover the initial investment: PP = Total Investment / Annual Cash Flow
The Net Present Value (NPV) formula represents the difference between the present value of expected cash inflows and outflows: NPV = Σ (CFt / (1 + r)^t) - Initial Investment
The Return on Investment (ROI) formula calculates the return on an investment: ROI = (Gain from Investment - Cost of Investment) / Cost of Investment
The Internal Rate of Return (IRR) represents the discount rate at which the NPV of an investment becomes zero, indicating the break-even point

Financial Feasibility Analysis

The purpose of preparing a cash flow table is to organize and analyze the inflows and outflows of cash over a project's lifespan, helping to evaluate its financial viability and make informed decisions

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Description

Test your knowledge of financial feasibility analysis with this quiz. Explore the steps involved in deriving financial values and preparing cash flow tables for determining the financial viability of a proposed project. Gain insight into the key elements such as labor rate, productivity rate, market price, and interest rate.