Questions from Corporate Finance

Q: Consider a project with the following cash flows: /

Consider a project with the following cash flows: a. How many internal rates of return does this project have? b. Which of the following numbers is the project IRR: (i) –50%; (ii)...

Q: Consider projects Alpha and Beta: / The opportunity cost

Consider projects Alpha and Beta: The opportunity cost of capital is 8%. Suppose you can undertake Alpha or Beta, but not both. Use the IRR rule to make the choice.

Q: Suppose you have the following investment opportunities, but only $90

Suppose you have the following investment opportunities, but only $90,000 available for investment. Which projects should you take?

Q: Read the following passage: “Companies usually buy (a

Read the following passage: “Companies usually buy (a) assets. These include both tangible assets such as (b) and intangible assets such as (c). To pay for these assets, they sell (d) assets suc...

Q: Consider the following projects: / a. If the

Consider the following projects: a. If the opportunity cost of capital is 10%, which projects have a positive NPV? b. Calculate the payback period for each project. c. Which project(s) would a firm us...

Q: Which of the following are real assets, and which are financial

Which of the following are real assets, and which are financial? a. A share of stock. b. A personal IOU. c. A trademark. d. A factory. e. Undeveloped land. f. The balance in the firm’s checking...

Q: An investment costs $1,548 and pays $138 in

An investment costs $1,548 and pays $138 in perpetuity. If the interest rate is 9%, what is the NPV?

Q: The Borstal Company has to choose between two machines that do the

The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: These costs are expressed in real terms. a. Suppose yo...

Q: Explain why we refer to the opportunity cost of capital, instead

Explain why we refer to the opportunity cost of capital, instead of just “cost of capital” or “discount rate.” While you’re at it, also explain the following statement: “The opportunity cost of capita...

Q: Look again at your calculations for Problem 29. Suppose that technological

Look again at your calculations for Problem 29. Suppose that technological change is expected to reduce costs by 10% per year. There will be new machines in year 1 that cost 10% less to buy and operat...