QUESTION FIVE (6 marks)
Please answer each of the following questions. Each solution should be accompanied by a brief explanation of no more than two (2) typed lines in length.

A)Cynthia is the Chief Financial Officer of Big Corporation (BC). Cynthia’s current objective is to evaluate five new projects with a total capital requirement of $6 million. All of the projects have a positive NPV. The overall capital available for new projects for the next year is $5 million. Which of the following statements about the capital budgeting process that Cynthia should employ is true? 1)Cynthia should rank the projects in increasing order of NPV and choose the highest ranked projects in order until the capital available is exhausted. 2)Cynthia should rank the projects in increasing order of internal rate of return and choose the highest ranked projects in order until the capital available is exhausted. 3)Cynthia should calculate the NPV of various combinations of projects and choose that combination that provides the highest NPV without exceeding the capital available. 4)Cynthia should rank the projects in decreasing order of NPV and choose the highest ranked projects in order until the capital available is exhausted.

Explanation:Calculating combinations of different projects will give Cynthia a better idea in which projects to invest in. NPV also provides proper rule for choosing mutually exclusive projects

B) Which of the following statements about diversification is false? 1)Diversification can be accomplished by adding a stock that is perfectly positively correlated with the investor’s existing stock portfolio. 2)As the number of stocks in the portfolio increases, the diversifiable risk of the portfolio reduces. 3)When stock returns do not move perfectly with each other, the variations in the returns on one stock may be countered by variations in other stocks’ returns. 4)A perfectly diversified portfolio will still have risk equal to systematic...

...times attributed to the nature of a project.
Capital inv appraisal of new technologies: Problems, misconceptions and research directions
* Specifically, it has been alleged that the traditional appraisal methods of payback,
discounted netpresentvalue (NPV) and internal rate of return (IRR) undervalues the long-term
benefits; that traditional financial appraisals assume a far too static view of future industrial
activity, under-rating the...

...Examples Of NetPresentValue (NPV), ROI and
Payback Analysis
Introduction
Terms and Definitions
NetPresentValue - Method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.
Discount Rate - Also known...

...new vessel in presentvalue terms? Compared to the book value of the ship of $39M, what can you conclude about the effect of the installment payments?
3. Should Ms. Linn purchase the capesize carrier? Assume that it is going to be sold for scrap after 15 years. [Hint: Construct the Free Cash Flows of the project.]
4. Does your conclusion in (3) change if you instead assume that Ocean Carriers operates the capesize for the full life of 25 years...

...flow targets and maintain Stryker’s 20% growth benchmark.
To what extent have they been shaped by elements of corporate finance theory?
They are heavily influenced by corporate finance theory
All submissions are required to show the netpresentvalue (NPV), internal rate of return (IRR) and payback period.
They need to highlight the project’s anticipated outgoing cash flow and earnings effects on the company and describe specific risks that...

...
A project's average net income divided by its average book value is referred to as the project's average:
A. netpresentvalue.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period.
The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a project will generate if the project in financed solely with...

...decisions: calculation of unit costs, use within pricing decisions,
sensitivity analysis
Investment appraisal: payback period, accounting rate of return, discounted cashflow
techniques ie netpresentvalue, internal rate of return
Nature of long-term decisions: nature of investment importance of true value of money,
cash flow, assumptions in capital investment decisions, advantages and disadvantages of
each method
4 Financial...

...
NetpresentValue, Mergers and acquisitions
Abstract
Main objective of undertaking this to report was learn about NPV presentvalue (NPV) method to make capital budgeting decision(Google NEW Project) and success factors involved in mergers and acquisitions(Google-Groupon Case).
Answers to the Assignments
Part I: Google should go ahead with the new project.
Part-II: Google’s acquisition of Groupon would...

...corporate finance.
3. Which of the following correctly completes the next sentence? The value of any asset is the presentvalue of all future
a. 0 profits it is expected to provide
b. 0 revenue it is expected to provide
c. 0 net working capital it is expected to provide
d. 0 cash flows it is expected to provide
Objective: Compare and contrast the market value of an asset or liability from the book...