Questions from Financial Management

Q: Suppose a firm makes the policy changes listed below. If

Suppose a firm makes the policy changes listed below. If a change means that external, nonspontaneous financial requirements (AFN) will increase, indicate this by a (+); indicate a decrease by a (()(...

Q: What are some actions an entrenched management might take that would harm

What are some actions an entrenched management might take that would harm shareholders?

Q: What types of projects require the least detailed and the most detailed

What types of projects require the least detailed and the most detailed analysis in the capital budgeting process?

Q: Explain why the NPV of a relatively long-term project,

Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to changes in the cost of capi...

Q: When two mutually exclusive projects are being compared, explain why the

When two mutually exclusive projects are being compared, explain why the short-term project might be ranked higher under the NPV criterion if the cost of capital is high, whereas the long-term project...

Q: Suppose a firm is considering two mutually exclusive projects. One has

Suppose a firm is considering two mutually exclusive projects. One has a life of 6 years and the other a life of 10 years. Would the failure to employ some type of replacement chain analysis bias an N...

Q: Why is it true, in general, that a failure to

Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?

Q: Why are interest charges not deducted when a project’s cash flows are

Why are interest charges not deducted when a project’s cash flows are calculated for use in a capital budgeting analysis?

Q: How do simulation analysis and scenario analysis differ in the way they

How do simulation analysis and scenario analysis differ in the way they treat very bad and very good outcomes? What does this imply about using each technique to evaluate project riskiness?

Q: What factors should a company consider when it decides whether to invest

What factors should a company consider when it decides whether to invest in a project today or to wait until more information becomes available?