Reference no: EM131134370
The NPV & Payback Method
Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you to calculate the projectAc€?cs NPV. You donAc€?ct know the projectAc€?cs initial cost, but you do know the projectAc€?cs regular payback period is 2.5 years.
|
Years
|
Cash Flow
|
|
Year 1
|
$300K
|
|
Year 2
|
$425K
|
|
Year 3
|
$500K
|
|
Year 4
|
$400K
|
1. If the projectAc€?cs WACC is 9%, the projectAc€?cs NPV is which of the following?
A. $376,516
B. $327,405
C. $392,886
D. $261,924
2. Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Choose all that apply.
A. The payback period does not take the projectAc€?cs entire life into account.
B. The payback period does not take the time value of money into account.
C. The payback period is calculated using net income instead of cash flows.
Conclusions about Capital Budgeting
3. Companies often use several methods to evaluate the projectAc€?cs cash flows & each of them has its benefits & disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Choose all that apply.
A. The discounted payback period improves on the regular payback period by accounting for the time value of money.
B. Managers have been slow to adopt the IRR because percentage returns are a harder concept for them to grasp.
For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR.
4. ______ is the single best method to use when making capital budgeting decisions.
A. NPV
B. IRR
|
She invest annually in her ira
: Joan wants to start an IRA that will have $250,000 in it when she retires in 29 years. How much should she invest annually in her IRA to do this if the interest is 13% compounded annually? A) 494.05 B) 2422.43 C) 3506.17 D) 815.45
|
|
Chesteris planning to conduct exit interviews
: Assume Chester Corp. is downsizing the size of their workforce by 20% (to the nearest person) next year from various strategic initiatives. Chesteris planning to conduct exit interviews to learn more about how they can improve in processes and inc..
|
|
Write this production function in per capita form
: In the context of this neoclassical growth model, can a country have too much saving?
|
|
What is the abbreviation for coronary artery disease
: What symptoms suggest that this patient is suffering from coronary artery disease and not some other disorder? Why is it important to test the heart under stress rather than obtaining a resting echocardiogram? Why is a cardiac catheterization needed ..
|
|
The npv & payback method
: Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you to calculate the projectAc€?cs NPV. You donAc€?ct know the projectAc€?cs initial cost, but you do know the projectAc€?cs regular payb..
|
|
Determining the root causes of health disparities
: Determining the root causes of health disparities helps us to ask critical research questions regarding social forces that may contribute to disease patterns.
|
|
Write response to the ideas or arguments
: Watch one of these TED talks in this playlistWords, Words, Words! (Links to an external site.) - Write response to the ideas / arguments in the talk.
|
|
Two different active equity portfolio managers
: Consider the annual returns produced by two different active equity portfolio managers (A and B) as well as those to the stock index with which they are both compared:
|
|
What if both the labor and the capital stocks are fixed
: Suppose output is growing at 3 percent per year and capital's and labor's shares of income are .3 and .7, respectively.
|