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1) Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to changes in the cost of capital than is the NPV of a short-term project.
2) When two mutually exclusive projects are being compared, explain why the short term project might be ranked higher under the NPV criterion if the cost of capital is high whereas the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? why or why not?
3) Suppose a firm is considering two manually exclusive projects. One has a life of 6 years and the other a life of 10 years. Would the failure to employ some type of replacement chain analysis bias an NPV analysis against one of the projects? Explain
you are given the following data on three securities a b and the market mnbspsecurityexpectedreturn r-standard
the final project for this module is a consultancy report to anthonys orchard an expanding apple orchard and
The Fischer Sport Store has assets of $525,300, costs of goods sold of $305,000, accounts receivable of $57,600, and inventory of $109,100. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?
A security firm is offered $80,000 in one year for providing CCTV coverage of a property. The cost of providing this coverage to the security firm is $74,000, payable now, and the interest rate is 8.5%. Should the firm take the contract?
Nigel received a Land Rover from his mother as a gift. Mom had purchased the Land Rover two years earlier for $65,000, but its fair market value at the date of the gift was only $50,000. No gift tax was paid by Mom at time of the gift.
Smith & Company issued $80 million maturity value of 5-year bonds, which carried a coupon rate of 6% and paid interest semi annually. Calculate the gain or loss that Smith & Company will incur as a consequence of retiring the debt early. Is the ea..
El Dorado Company has two production plants. Recently, the company conducted an ABM study to determine the cost of activities involved in processing orders for parts at each of the plants. How might an operations manager use this information to manag..
From the Book: Green to Gold Business Playbook by Etsy and Simmons. How could vendors be encouraged to participate in Wal-Mart China’s sustainability initiatives? What are the distinguishing features of Wal-Mart China’s distribution system?
A young listed company developing drugs for neurological diseases. So far the company has not shown any sales due to the typically long lead times to produce medicines. The market now is on is volatile, its beta value = 2 , the access to capital is u..
Global Financial Corporation (GFC) has 10 million shares outstanding, each currently worth $80 per share. The firm’s mangers are considering a plan to split the company’s stock 2-for-1, but they are concerned about the impact this split announcement ..
Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Chip’..
A Treasury bill has a bid yield of 3.5% and an ask yield of 3.44%. The bill matures in 155 days. Assume a face value of $1,000. What is the least you could pay to acquire a bill?
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