By doing so‚ classification schemes can increase the efficiency of the capital budgeting process. 9.4 Explain the decision rules—that is‚ under what conditions a project is acceptable—for each of the following capital budgeting methods: a. Net present value (NPV) b. Internal rate of return (IRR) c. Modified internal rate of return (MIRR) d. Traditional payback (PB) e. Discounted payback (DPB) a. Should only be undertaken if NPV is greater than 0. b. Should only be undertaken if IRR is greater than
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has the highest present value? a. A b. B c. C d. D 4. Opportunity cost is a. cost which has already been incurred and cannot be recovered b. the value of the best alternative foregone when a choice is made between two investments c. the cost incurred by the next unit of production d. the difference between book value and market value for an asset 5. The constant growth model (or “dividend discount model”) of stock valuation is based upon the premise that a. the value of a stock is
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INDEX Introduction…………………………………………………………………….2 The development of a qualitative model Rationale………………………………………………………………8 The qualitative model………………………………………………...9 Strategic fit……………………………………………………………11 Market definition…………………………………………………….12 Customer definition…………………………………………………14 Product opportunity…………………………………………………15 Summary…………………………………………………………………….22 Bibliography…………………………………………………………………23 1 INTRODUCTION The process of bringing a new drug to market is an extremely expensive
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Larry Yung‚ Chairman of Citic Pacific Limited‚ has a decision to make. He must decide if he should invest in property and build the “Citic Tower II”. Under the current conditions‚ the current net present value is negative‚ which is one of the factors that Larry is using to decide. Another concern is that the commercial real estate market is very cyclical in the area. Also‚ with the current economic conditions‚ there is not really a guarantee that the “Citic Tower II” will survive in the area‚ which
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maximization model‚ the value of a firm’s stock is equal to the present value of all expected future ____ discounted at the stockholders’ required rate of return. Answer Selected Answer: profits (cash flows) Correct Answer: profits (cash flows) Question 6 3 out of 3 points Which of the following will increase (V0)‚ the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t + Real Option Value. Answer
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shelter provided by things other than debt‚ such as __________. 10) Preferred stock payment obligations are typically 11) If the yield to maturity for a bond is less than the bond’s coupon rate‚ then the market value of the bond is __________. 12) Assume that the par value of a bond is $1‚000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? 13) Certain countries have restrictions. In practice‚ U.S. investors have NOT
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Pacific Limited on a first-choice basis through an intermediary * Larry Yung (Chairman) thought they could acquire the site and turn it into another Grade-A office building “Citic Tower II” * Asking price of the land was $1 billion * Net present value of property around $1.54 billion * Building cost around $1.6 billion Citic Pacific Limited (CPL) * Larry Yung-Chairman of CPL * Incorporated in Hong Kong and listed on the Hong Kong Stock Exchange in 1991 * In 2000‚ infrastructure
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Investment appraisal techniques Introduction Investment is a key part of building your business. New assets such as machinery can boost productivity‚ cut costs and give you a competitive edge. Investments in product development‚ research and development‚ expertise and new markets can open up exciting growth opportunities. At the same time‚ you need to avoid overstretching
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Budgeting Methods for Corporate Project Selection In a 2001 Graham and Harvey survey of 392 chief financial officers (CFOs) asked “how frequently they used different capital budgeting methods?” Approximately 75% of the CFOs replied that they use net present value (NPV) or Internal Rate of Return (IRR) always or almost always (Smart‚ Megginson & Gitman‚ 2004‚ pg. 251). Projects are viewed as capital investments in the corporate world‚ and as such‚ are evaluated closely for their possible financial
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Mini-Case on Bethesda Mining Company was taken from the text corporate finance (2010‚ P. 203-204). In order to determine if Bethesda Mine should open‚ a thorough analysis of the payback period‚ profitability index‚ average accounting return‚ net present value‚ internal rate of return‚ and the modified internal rate of return have been conducted. Table 1. Cash flow on Investment Tax rate= 38% Year 0 Cash flow (outflow) on investment Opportunity cost of using land= $7‚000‚000 Cost
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