Read the following questions carefully and discuss the proposed agendas concisely. No word limit is imposed, but
Question:
Read the following questions carefully and discuss the proposed agendas concisely. No word limit is imposed, but a short and concise answer is favored.
(a) Smith Inc. is a public company but is tightly controlled by Joe Smith. Mr. Smith is quite condent about his ability to evaluate investments in all aspects of the business. The situation at Smith Inc. is quite dierent from that at Jones Inc., although they share a similar line of business. Jones Inc. has a much less powerful CEO, Fred Jones, who delegates much more control to the rm's divisional heads. Mr. Fred meets with the divisional heads to make a capital allocation choices as a group. Discuss how and why Smith Inc. and Jones Inc. might have dierent approaches for determining the discount rates used to evaluate their projects.
(b) Discuss three sources of dierence between "Cash provided by operations" and "Free Cash Flows."