Making Capital Investment Decisions

Capital Budgeting Problems [LO1] (Professor)

Capital Budgeting Problems [LO1] What difficulties might come up in actual applications of the various criteria we discussed in this chapter? Which one would be the easiest to implement in actual applications? The most difficult?

#2 Ch. 9: Net Present Value and Other Investment Criteria

Consider the following as you read:

What are the differences in the calculation of net present value and internal rate of return?

#3 Ch. 10: Making Capital Investment Decisions

Consider the following as you read:

How are investments in net working capital used in the preparation of a firm’s net cash flow?

#4 Cash Flow and Depreciation [LO1] (Professor)

Cash Flow and Depreciation [LO1] “When evaluating projects, we’re concerned with only the relevant incremental after tax cash flows. Therefore, because depreciation is a noncash expense, we should ignore its effects when evaluating projects.” Critically evaluate this statement.

#5 Ch. 11: Project Analysis Evaluation

Consider the following as you read:

What is the acceptance or rejection criteria when using the net present value of cash flow analysis?

#6 Scenario Analysis [LO2] (Professor)

Scenario Analysis [LO2] You are at work when a co-worker excitedly comes to your desk and shows you the scenario analysis that he has just completed for a potential new project. All three scenarios show a positive NPV. He states, “We have to take this project!”What is your initial reaction regarding this new project. Do you believe the results of the scenario analysis?

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