Under what circumstances will the NPV, IRR, and PI techniques provide different capital budgeting decisions? What are the underlying causes of the differences often found in the ranking of mutually exclusive projects using NPV and IRR?
Answer to relevant QuestionsSuppose that a 30-year U.S. Treasury bond offers a 4% coupon rate, paid semiannually. The market price of the bond is $1,000, equal to its par value. a. What is the payback period for this bond? b. With such a long payback ...Using a 14% cost of capital, calculate the NPV for each of the projects shown in the following table and indicate whether or not each is acceptable. Consider a project with the following cash flows and a firm with a 15% cost of capital. Year Cash Flow 0............. −$20,000 1.............. 50,000 2................. −10,000 a. What are the two IRRs ...Wilkes, Inc. must invest in a pollution-control program in order to meet federal regulations to stay in business. There are two programs available to Wilkes: an all-at-once program that will be immediately funded and ...What are the tax consequences of selling an investment asset for more than its book value? Does this have an effect on project cash flows that must be accounted? What is the effect if the asset is sold for less than its book ...
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