Questions from Managerial Finance

Q: Do the net present value (NPV) and internal rate of

Do the net present value (NPV) and internal rate of return (IRR) agree with respect to accept–reject decisions? With respect to ranking decisions? Explain.

Q: How do the constant-growth valuation model and capital asset pricing

How do the constant-growth valuation model and capital asset pricing model methods for finding the cost of common stock differ?

Q: How is a net present value profile used to compare projects?

How is a net present value profile used to compare projects? What causes conflicts in the ranking of projects via net present value and internal rate of return?

Q: What is the payback period? How is it calculated?

What is the payback period? How is it calculated?

Q: What weaknesses are commonly associated with the use of the payback period

What weaknesses are commonly associated with the use of the payback period to evaluate a proposed investment?

Q: How is the net present value (NPV) calculated for a

How is the net present value (NPV) calculated for a project with a conventional cash flow pattern?

Q: What decision rule do managers follow when they use NPV to accept

What decision rule do managers follow when they use NPV to accept or reject investment ideas? How is an investment’s NPV related to the firm’s market value?

Q: Explain the similarities and differences between NPV, PI, and EVA

Explain the similarities and differences between NPV, PI, and EVA.

Q: How is the before-tax cost of debt converted into the

How is the before-tax cost of debt converted into the after-tax cost?

Q: What is the internal rate of return (IRR) on an

What is the internal rate of return (IRR) on an investment? How is it determined?