The payback technique is criticized for not using discounted cash flows. Under what conditions will this matter most? That is, under what patterns of cash flow will payback and NPV or IRR be likely to give different answers?
Answer to relevant QuestionsThe Lindscomb family had the following income in 2012: Salaries: Mark .......... $63,500 Ashley ............. 57,900 Interest on investments: IBM bonds............ $ 4,750 New York City bond...... 1,400 Savings ...Callaway Associates, Inc. is considering the following mutually exclusive projects. Callaway’s Cost of capital is 12%. a. Calculate each project’s NPV and IRR. b. Which project should be undertaken? Why? Rationalize the appropriateness of using the cost of capital to analyze normally risky projects and higher rates for those with more risk. Explain the difference between a fixed and a variable cost. How do these concepts change as the time horizon lengthens? In other words, are the same things fixed over a 5-year planning period that are fixed in a typical ...Describe the difference between a floating and a fixed exchange rate system.
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