How would an increase in the required rate of return

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Reference no: EM133828127

Question: Discussion (No outside sources required all necessary information has been presented in Module 4 in Moodle)

Using what you have learned in the lecture notes and having just analyzed each of the projects using the four key capital budgeting techniques, describe the reinvestment assumptions for each of the methods. (2 pts) Hint, the reinvestment rate assumptions have to do with how (if) the cash flows are discounted during analysis. Get your assignment done Now!
Payback Period
Profitability Index (PI)
NPV
IRR
For an independent project, which of the (above listed) capital budgeting analysis techniques will always have the same accept/reject decision, and why. Be precise in your explanation of "why" the techniques would agree. Hints: Keep it simple, don't go down the "but what if....." road. Independent projects - accepting one doesn't mean you have to reject another one. Don't assume financial constraints (you could theoretically fund all viable projects). Assume "normal" cash flows (only 1 sign change, in other words, the outlay is considered negative and all future cash flows are positive), so that there is only a single IRR. (2 pts)

How would an increase in the required rate of return affect the project's calculated NPV? ii) How would the increase in the required rate of return impact the project's internal rate of return (IRR)? Assume no change to the timing or amount of cash flows. Explain each and be specific as to Why (or if there is an impact) and how would the higher required rate change the NPV and the IRR (2 answers here) and what is the possible impact on the accept/reject decision for the project under each of the two analysis methods (another 2 answers).

Reference no: EM133828127

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