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##### See attachment. Part 1. Capital Budgeting Practic...

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See attachment. Part 1. Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows: Year Cash flow 0 - $400,000 1 $100,000 2 $120,000 3 $850,000 ? If the discount rate is 0%, what is the project's net present value? ? If the discount rate is 2%, what is the project's net present value? ? If the discount rate is 6%, what is the project's net present value? ? If the discount rate is 11%, what is the project's net present value? ? What is this project's modified internal rate of return? Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis? [You can't upload the graph unto Coursenet. Look at the graph you draw and write a short paragraph stating what the graph 'shows"].. b. Consider a project with the expected cash flows: Year Cash flow 0 - $815,000 1 + 141,000 2 + 320,000 3 + $440,000 ? What is this project's internal rate of return? ? If the discount rate is 1%, what is this project's net present value? ? If the discount rate is 4%, what is this project's net present value? ? If the discount rate is 10%, what is this project's net present value? ? If the discount rate is 18%, what is this project's net present value? Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis? You can't upload the graph unto Coursenet. Observe the graph and write a short paragraph stating what the graph 'shows c. A project requiring a $4.2 million investment has a profitability index of 0.94. What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment) Part 2. Read the article linked below. Then write a paper answering the following question: Which method do you think is the better one for making capital budgeting decisions - IRR or NPV? Defend your answer with references to the background materials.,Disregard the see attach,Part 1. Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows: Year Cash flow 0 - $400,000 1 $100,000 2 $120,000 3 $850,000 ? If the discount rate is 0%, what is the project's net present value? ? If the discount rate is 2%, what is the project's net present value? ? If the discount rate is 6%, what is the project's net present value? ? If the discount rate is 11%, what is the project's net present value? ? What is this project's modified internal rate of return? Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis? [You can't upload the graph unto Coursenet. Look at the graph you draw and write a short paragraph stating what the graph 'shows"].. b. Consider a project with the expected cash flows: Year Cash flow 0 - $815,000 1 + 141,000 2 + 320,000 3 + $440,000 ? What is this project's internal rate of return? ? If the discount rate is 1%, what is this project's net present value? ? If the discount rate is 4%, what is this project's net present value? ? If the discount rate is 10%, what is this project's net present value? ? If the discount rate is 18%, what is this project's net present value? Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis? You can't upload the graph unto Coursenet. Observe the graph and write a short paragraph stating what the graph 'shows c. A project requiring a $4.2 million investment has a profitability index of 0.94. What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment) Part 2. Read the article linked below. Then write a paper answering the following question: Which method do you think is the better one for making capital budgeting decisions - IRR or NPV? Defend your answer with references to the background

Paper#13729 | Written in 18-Jul-2015

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