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Q1 (a) Critically explain how NPV, IRR and Payback can be used to appraise investments.
(b) Contrast the merits of these approach when capital is:
(i) Not rationed.
(ii) rationed.
Q2 (a) Describe how, in principles, the value of a firm might change as its leverage increases.
(b) Discuss why, in practice, firms might choose high levels of debt.
(c) Briefly explain how your answers to a and b might observed differences in debt ratios.
Determine suitable ratios relating to profitability, liquidity, efficiency and gearing.
What are the two projects net present values assuming the cost of capital is 5%? What is the initial investment outlay?
Bonds are thought to be a nice constant investment, paying a certain value of interest and then repaying your original investment [usually $1,000] after the bond term is up, usually in ten to thirty years.
Identifying the errors made by Linton in their project appraisal and calculating the weighted average cost of capital for Everest.
Calculate the payback period if advanced machine is purchased and calculate the net present value if advanced machine is purchased.
discuss the impact of each of the factors on your opinion. Offer some logic or current reference(s) to support your answer. Which factor do you think will have the biggest impact on interest rates?
What is your total return on the stock? What is the dividend yield? What is the capital gains yield and what is the expected return of the stock according to the security market line?
Estimate the market value and weight of each component of the capital structure and estimate the book value and weight of each component in the capital structure.
Discuss the disadvantages of ratio analysis. You must use questions 1 to 3 and examples from your workplace to substantiate your discussion
Calculate the Internal Rate of return for both projects and again recommend which of the two projects, if any, should be selected based on this information.
ou will also be expected to carry out horizontal analysis on the Income Statement using (2010 as base) and vertical common size analysis on the Statement of Financial Position (Balance Sheet) for 2 year.
Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.
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