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The net present value method of project evaluation is preferred to the internal rate of return method because: a) the internal rate of return method may give multiple rates of return or zero rates of return in some cases, but not for mutually exclusive projects. b) the internal rate of return method may give an inconsistent ranking due to the magnitude or timing of cash flows. c) most projects are independent rather than mutually exclusive. d) the internal rate of return method yields net present value profiles that do not intersect for mutually exclusive projects.
How much will you have at the end of 20 years? What if interest is compounded quarterly?
Please evaluate the equal annual annuity for the following repeated project. The initial investment for the project is $1 million and it will produce cash flows $0.5 million, $1.0 million, $0.8 million in year 1, 2 and 3. The discount rate is 5%.
Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy and Bruce each own 25% of Clip..
On July 1, an investor holds 50,000 shares of a certain stock. The market price is $29 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract..
The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,800, they could be sold for $19,700. Alternatively, the keyboards could be sold "as is" for $7,200. What..
Atlas Transportation is considering installing temperature logger in all its refrigerated trucks for monitoring temperatures during transit.
What effect would an increase in the prime rate to 4.25% for the entire year have on Matthews's EBR calculated in part (a)?
Unfortunately, in recent times, we have seen a number of examples of unethical behavior in organizations, often tied to the organization's handling of finances. Discuss ethical issues facing the top leadership or financial managers in today's corpora..
Suppose you sell a fixed asset for $50,000 when its book value is $60,000. If your company's marginal tax rate is 40%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
Using the NPV as a decision rule for investment purposes takes into account the following considerations:
What convincing argument can you make that the gain should be treated as capital?
The questions below are not meant to be indicative of the types of questions I tend to use in an exam. It is not meant to be comprehensive and cover all material discussed in class. Please refer to class notes for the material coverage in class...
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