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Project evaluation

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I have to answer these questions below in 400 words. I have been reading the chapter and don't fully understand these questions:

Discuss the various methods used for project evaluation and the advantages and disadvantages of each?

Discuss the various aspects that must be considered when calculating cash flow when making investment decisions?

Discuss the CAPM model. What factors would you consider in using it for project evaluation as opposed to company evaluation?

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Solution Summary

The solution discusses various aspects of project evaluation - estimating cash flows, various methods and the use of CAPM model

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Discuss the various methods used for project evaluation and the advantages and disadvantages of each?

The various methods and advantages and disadvantages are
1. Payback method - Payback measures the time taken to recover the initial investment. The advantage is that this method is simple to use and is an indicator of liquidity and risk of a project. The disadvantage is that payback method does not use time value of money, cash flows beyond the payback period and the cut-off period is arbitrary.
2. Discounted payback period - In this method, we use the discounted cash flows and find the time taken to recover the initial investment. The discounted payback period has all the advantages of payback period and also takes into ...

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