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1. A significant flaw in the payback method of capital budgeting is that____________
A. it is calculated using arithmetic average instead of weighted moving average.
B. it assumes future cash flows are reinvested at the IRR.
C. it ignores cash flows following the payback period.
D. it only calculates present values prior to comparing them to investment amount.
2. For the following cash flows, calculate the NPV based on a cost of capital of 12%: Investment of $50,000; Year1: $16,000; Year2: $20,000; Year3: $5,000; Year 4: $29,000
A. -$775.00
B. $3,522.00
C. $2,218.52
D. -$1,281.01
You need to borrow $100,000 on your line of credit to cover incrased working captal expense due to sales growth. Bnak A is willing to lend to you at 7.5% with 10% compensating balances. How much will you have to borrow form each bakn to have the amou..
Assuming you can buy, sell, and short-sell all of the bonds above with no costs, how much of each bond would you buy or short to constrcut a porfolio of the four 6%-coupon bonds that pays the exact same cash flows as the 5.5% 2-year coupon bond?
Bond ratings classify bonds based on:
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