Why do we consider changes in net working capital associated with a project to be cash inflows or out-flow rather than consider the absolute level of net working capital?
Answer to relevant QuestionsFor what kinds of investments does terminal value account for a substantial fraction of the total project NPV, and for what kinds of investments is terminal value relatively unimportant? Why is using the cost of equity to discount project cash flows inappropriate when a firm uses both debt and equity in its capital structure? Which variable do you think would be more valuable to examine in a project sensitivity analysis the growth rate of sales or the allowable depreciation deductions each year? Explain. What happens to a company’s stock price when the firm announces plans for a seasoned equity offering? What are the long- term returns to investors, following an SEO? What is shelf registration? Why do you think this has proven to be so popular among issuing firms?
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