What is indicated by a net present value of exactly zero

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Q1.  A company has budgeted Php 1,000,000 for capital investment during the upcoming year.  There are seven proposals seem to be congruent with the mission, objectives, and goals of the organization.  In analyzing these proposals, management is interested in wealth maximization and is assuming a 12% cost of capital.  Which projects would you choose and why?

Project

Initial Investment

NPV

IRR

A

550,000

200,000

14%

B

600,000

125,000

13%

C

200,000

175,000

14%

D

300,000

180,000

12.5%

E

250,000

200,000

13%

F

400,000

-100,000

10%

G

700,000

300,000

14.5%

Q2. Explain the following statement:" Analysts look at both balance sheet and income statement ratios when appraising a firm's financial condition."

Q3. If the net present value is a positive amount, the investment exceeds the required rate of return. If the net present value is a negative amount the return on the proposed investment is less than the required rate of return. What is indicated by a net present value of exactly zero? Will the proposed project of zero net present value be accepted? Explain your answer.

Reference no: EM133105032

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