Question: 6. Consider the set of projects under consideration for Sox Corp. As the Manager of Finance for Sox Corp., you have been given a budget

6. Consider the set of projects under consideration for Sox Corp. As the Manager of Finance for Sox Corp., you have been given a budget of $1,374,500 for capital projects. Which projects will NOT be undertaken based on the numbers provided below by your analysts? Check all that are rejected.

Project Cost NPV
A 410,000 18,500
B 125,000 14,500
C 64,500 18,000
D 600,500 23,500
E 785,000 40,000
F 400,000 32,000

7. Given the advantages and disadvantages outlined below, which decision criteria (A, B, C, or D) is Net Present Value (NPV)?

Criteria Advantage Disadvantage
A Easy to understand. Quick computation. May be best option for small-budget projects. Does not account for all cash flows. Does not account for time value of money.
B Accounts for all cash flows and provides same accept/reject decision as NPV for conventional cash flows on independent projects. Cash flows may generate multiple results. Cannot be used to rank mutually exclusive projects. High results may not be best.
C Accounts for all cash flows as well as the time value of money. My require a tweak in order to make appropriate choices under budget constraints.
D Accounts for all cash flows as well as the time value of money. Can be used under budget constraints. In isolation may lead to improper ordering of projects.

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