+1-415-670-9189
info@expertsmind.com
Business finance task - capital budgeting
Course:- Financial Management
Length: word count:1000
Reference No.:- EM13219




Assignment Help
Assignment Help >> Financial Management

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.
Your company is considering the construction of a new building. The building will have an initial cash outlay of $7 million, and will produce cash flows of $3 million at the end of year 1, $4 million at the end of year 2, and $2 million at the end of years 3 through 5. What is the internal rate of return on this new building? Would you recommend the company proceed with the construction? Why or why not?

Your company is considering two mutually-exclusive projects. Both require an initial outlay of $10,000 and will operate for 5 years. Project A will produce expected cash flows of $5,000 per year for years 1 through 5, whereas project B will produce expected cash flows of $6,000 per year for years 1 through 5. Because project B is the riskier of the two projects, management has decided to apply a required rate of return of 15 percent to its evaluation but only a 12 percent required rate of return to project A. Discuss each project's risk-adjusted net present value.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
General Mills has a $1,000 par value, 12-year to maturity bond outstanding with an annual coupon rate of 8.34 percent per year, paid semiannually. Market interest rates on sim
Explain how a net present value (NPV) profile is used to compare projects. How does this compare to internal rate of return (IRR)? How does reinvestment affect NPV and IRR?
Pete’s, Inc. recently paid $4.00 to their shareholders as the annual dividend. The company also announced that future dividends will be increasing at a constant rate of 4.5 pe
Bennington Industrial Machines issued 149,000 zero coupon bonds six years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.4 percent. Interest
There is a 4.6 percent coupon bond with five years to maturity and a current price of $1,046.00. What is the dollar value of an 01 for the bond? (Do not round intermediate cal
Pierce Furnishings generated $2 million in sales during 2012, and its year-end total assets were $1.3 million. Also, at year-end 2012, current liabilities were $500,000, consi
Westover Ridge has a management contract with its president that requires a lump sum payment of $20 million to be paid upon the completion of the president's first ten years o
Pluto's has 14,000 shares of stock outstanding with a par value of $1 per share. The market value is $39.60 per share. The balance sheet shows $522,500 in the capital in exces