Questions from Corporate Finance

Q: An investment project has annual cash inflows of $4,200

An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14 percent. What is the discounted payback period for these cash flows if the initial cost i...

Q: Dahlia Industries had the following operating results for 2009: sales =$

Dahlia Industries had the following operating results for 2009: sales =$22,800; cost of goods sold =$16,050; depreciation expense =$4,050; interest expense =$1,830; dividends paid =$1,300. At the begi...

Q: An investment project costs $15,000 and has annual cash

An investment project costs $15,000 and has annual cash flows of $4,300 for six years. What is the discounted payback period if the discount rate is zero percent? What if the discount rate is 5 percen...

Q: You’re trying to determine whether to expand your business by building a

You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $15 million, which will be depreciated straight-line to zero ove...

Q: A firm evaluates all of its projects by applying the IRR rule

A firm evaluates all of its projects by applying the IRR rule. If the required return is 16 percent, should the firm accept the following project? Year ……………………………… Cash Flow 0……………………………………………….−$34...

Q: For the cash flows in the previous problem, suppose the fi

For the cash flows in the previous problem, suppose the fi rm uses the NPV decision rule. At a required return of 11 percent, should the fi rm accept this project? What if the required return was 30 p...

Q: A project that provides annual cash flows of $28,500

A project that provides annual cash flows of $28,500 for nine years costs $138,000 today. Is this a good project if the required return is 8 percent? What if it’s 20 percent? At what discount rate wou...

Q: If we define the NPV index as the ratio of NPV to

If we define the NPV index as the ratio of NPV to cost, what is the relationship between this index and the profitability index?

Q: In evaluating the Cayenne, would you consider the possible damage to

In evaluating the Cayenne, would you consider the possible damage to Porsche’s reputation erosion?

Q: “When evaluating projects, we’re concerned with only the relevant incremental

“When evaluating projects, we’re concerned with only the relevant incremental aftertax cash flows. Therefore, because depreciation is a noncash expense, we should ignore its effects when evaluating pr...