1. What is capital budgeting and how does it differ from operational budgeting? What items are included in a capital budget that is not included in an operational budget?
2. A rich relative allows you to stipulate which of the two ways you receive your inheritance: (a)$850,000 one year after his death or (b)$250,000 on his death and $200,000 each year at the end of the first, second and third years. Assuming money is worth 10% calculate the NPV of each alternative. Based strictly on dollars and cents which one is more attractive? Include your calculations - you might take advantage of the tables in the appendix at the end of the chapters
3. Complete the following parts from Exercise 12-2: Assuming money is worth 8% compute the present value of the following - be sure to include how you arrived at your answer: HINT: you might use the tables in Appendix A

• $7,000 received 15 years from today
• The right to receive $1,000 at the end of each of the next six years
• The obligation to pay $3,000 at the end of each of the next 10 year