Businesses with severe capital rationing constraints should use IRR more than NPV. Do you agree? Explain.
Answer to relevant QuestionsYou have to pick between three mutually exclusive projects with the following cash flows to the firm: The cost of capital is 12%. a. Which project would you pick using the NPV rule? b. Which project would you pick using the ...Now assume that the facts in Problem 1 remain unchanged except for the depreciation method, which is switched to an accelerated method with the following depreciation schedule: Year % of Depreciable Asset 1 ...You have estimated the following cash flows on a project: Year Cash Flow to Equity ($) 0 ............. −5,000,000 1 ............. 4,000,000 2 ............. 4,000,000 3 ............. −3,000,000 Plot the NPV ...You are the owner of a small hard ware store, and you are considering opening a gardening store in a vacant area in the back of your present store. You estimate that it will cost you $50,000 to set up the new store and that ...You have just been approached by a magazine with an offer for renewing your subscription. You can renew for one year at $20, two years for $36, or three years at $45. Assuming that you have an opportunity cost of 20% and the ...
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