Reference no: EM133119183
1. What is the formula for calculating the present value of a future cash flow?
2. Would you choose project A or B based on below? Why?
A B
Today -$100 -$100
Year 1 +$50 +$150
Year 2 +$100 +$100
Year 3 +$150 +$50
3. Would you choose project X or Y based on below? Why?
X Y
Today -$100 -$100
Year 1 Expect +$150 +$200
Year 1 Minimum +$100 +nil
Year 1 Maximum +$200 +$400
4. If your company issued a $1 million promissory note that is payable in 90 days' time and the investor wants 6% pa return, how much will your company receive today?
5. If your company approaches a finance company and factors its accounts receivable on a non-recourse basis, will it receive more or less dollars than if it agreed to do this on a recourse basis?
6. If your company is looking to invest in a new project that is expected to have a 5-year life, would you look to finance this project by issuing bank accepted bills, debentures, or shares?
7. If you are looking to invest in a start-up company that you expect will be very successful but may collapse in the current market environment, would you prefer to buy ordinary shares in the company, convertible notes, or debentures?
8. If you are considering 2 projects, L and M. L has an internal rate of return of 24%, while M has an IRR of 18%, and L has a net present value of $2 million, while M has a NPV of $2.4 million. Which project will you choose?
9. If you can invest $100 and receive $50 each year for 3 years, at 10% WACC, what is the NPV and IRR?
10. If you are considering 2 mutually exclusive projects F and G. Which project are you likely to choose if F has a 5-year life and net present value of $300, while G has a 7-year life and net present value of $350? What influenced your decision?
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: 1. What is the formula for calculating the present value of a future cash flow?
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