Net present value of any standard investment project

Assignment Help Financial Management
Reference no: EM133305526

1. Draw a sketch (diagram) to show the relationship between Net Present Value (NPV) of any standard investment project A and the firm's discount rate. Complete the sketch by showing a second relationship for a similar but separate project, B Use the sketch to show how:

1. The ranking of two projects depends on the discount rate.

2. The ranking using the internal rate of return may differ to the ranking using NPV.

2. The NPV of a single project costing £100m in year 0 is £4.36 when a discount of 10% is used but negative at -£0.15 when the discount rate is raised to 14%. What can be deduced about the internal rate of return on this project?

3. Discuss whether or not the payback method of investment appraisal is of any use.

Reference no: EM133305526

Questions Cloud

Calculate the cost of issuing new common stock : What is the cost of retained earnings using the discounted cash flow approach? Calculate the cost of issuing new common stock.
Identify something that you did that was highly unusual : Identify something that you did that was highly unusual or bizarre. You do not need to share what you focus on, unless you choose to do so.
What duties and tasks are expected of wives and husbands : What duties and tasks are expected of wives and husbands today? Are mothers or fathers better or worse than they were four decades ago?
What is the value of the stock : The risk-free rate is 1.51% and the market risk premium is 7.20%. What is the value of the stock?
Net present value of any standard investment project : Draw a sketch (diagram) to show the relationship between Net Present Value (NPV) of any standard investment project A and the firm's discount rate
Explain the dismissals of employees can be legally justified : Explain the remedies that may be awarded in cases of unreasonable dismissal if this is proven by the employee who was so dismissed?
What are things that you have really liked about material : What are two things that you have really liked about the material you have been learning about? What really made you think? What was really easy for you
Maximum fraction of percentage increase in index : Calculate the maximum fraction of the percentage increase in the index that you can promise investors? Show all your work clearly.
What is meant by impossible trinity : What are the benefits of forming an optimum currency area? What is meant by the 'impossible trinity'?

Reviews

Write a Review

Financial Management Questions & Answers

  Describe your profit making arbitrage strategy

You are a manager of Short Term Capital Management (STCM). describe your profit making arbitrage strategy.

  Social phenomenon on drug abuse from macro

what you've learned regarding impact of social phenomenon (for instance, social inequality, social deviance,) on drug abuse from macro and micro perspectives

  Find the future value of an investment

Find the future value of an investment of $3,400 made today for the following rates and periods: Future value $ d. 10 percent compounded daily for three years. Future value $ e. 8 percent compounded continuously for two years. Future value $

  Should the hedger take a long or short futures position

The futures price of the related asset is $27 and the standard deviation of the change in this over the life of the hedge is $0.40.

  What is the annual worth of the purchase

If the device is rented for 5 years, annual rental costs are $100 in Year 0, $150 in Year 1, $200 in Year 2, $250 in Year 3, and $300 in Year 4.

  Dividend policy is relevant

Dividend policy is relevant. Shareholders are unable to personally adjust the dividend policy set by the firm. According to Miller and Modigliani, a firm should alter its investment policy whenever a change is made in its dividend policy.

  What is their weighted average cost of capital

Assuming Finance Inc. has 45% of capital financed through long-term bonds, 30% in common equity, What is their weighted average cost of capital?

  What rate of return would you be earning

If this investment is going to cost you $70,000 today what rate of return would you be earning?

  What would be the new price for each bond

If the market rate of interest on each bond fell from 10 percent to 7 percent and the durations found in part (a) remained constant, what would be the new price for each bond?

  What is the well worth today

The cash flow is expected to increase by 3.5 percent per year indefinitely. What is the well worth today if the discount rate is 15 percent?

  What is each bonds expected capital gains yield today

Since this is a corporate bond, assume the company makes semi-annual coupon payments and also assume the bond matures on today’s date in its maturity year. What is each bond’s yield to maturity? What is each bond’s expected capital gains yield today?

  Meyers-briggs type indicator personality inventory

What is the Meyers-Briggs Type Indicator personality inventory, and why is it a useful tool for healthcare executives?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd