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Capital Budgeting

Calculating the net present value.

Suppose that you are in the real estate business. You are considering the construction of an office building. The land would cost $50,000 and construction would cost another $300,000. Assume for the moment that a $400,000 payoff is guaranteed. The office building is not the only way to obtain $400,000 one year from now. How

Calculating the present value.

Suppose you retire at age 70, with a life expectancy of 20 more years, and you expect to spend $55,000 a year during your retirement. How much money do you need to save by age 70 to support this consumption plan? Assume an interest rate of 7%.

10 Corporate Finance Questions on Corporate Finance that discuss issues like Cost of Capital, Credit Policy, Working Capital Financing, Dividend payments, Capital Structure, Impact of write off of non performing assets

1. A company has a debt ratio greater than the industry average. How would an investor evaluate the implications of this higher debt ratio in making an investment decision in this company's common stock? 2. In your opinion, what are the major factors determining the kind of financing for working capital a company can secure?

Capital budgeting Process: WACC, payback, NPV, risk, ROA

1. Why would a manager use the Weighted Cost of Capital for investment decisions when a specific project may be funded by a particular source of capital, (e.g. debt or equity)? 2. What capital budgeting process and evaluation does your organization (or one you can talk to) use? Specifically what Pay Back Period and NPV di

Comparing investment criteria: payback, NPV, IRR, profitability index

Consider the following two mutually exclusive projects: (Please see attached spreadsheet for info.) Whichever project you choose, if any, you require a 15% return on your investment. a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the NPV criterion, which investment will y