Please answer these questions with a few sentences. Thank you in advance.
1. The general rule is that firms should adopt positive NPV projects, and reject negative NPV projects. But what if a project has a $0 NPV? Should they accept the project or reject it? Explain.
2. Next week we learn how to calculate net present value (Chapter 13). Net Present Value (NPV) analysis is a tool for evaluating projects. It is calculated by; 1) estimating all incremental cash flows for a project, positive and negative, including the initial investment, 2) estimating the risk of the project, 3) discounting to the present, all the cash flows, at the rate appropriate for the risk (the COST OF CAPITAL). The general rule is; accept all projects with a positive NPV, reject all projects with a negative NPV. NPV will, in most cases, be the best tool to analyze long term projects. Now, suppose that two companies are looking at the same project. Company “A” has a beta of 1.5 and a cost of capital of 25%. Company “B” has a beta of 0.8 and a cost of capital of 15%. When evaluated at a rate of 25%, the project shows an NPV of -$2 million; when evaluated at a rate of 15%, the project shows an NPV of +$5 million.Should either company accept the project, and if so, under what conditions?
Plagiarism Free Papers
All our papers are original and written from scratch. We will email you a plagiarism report alongside your completed paper once done.
All papers are submitted ahead of time. We do this to allow you time to point out any area you would need revision on, and help you for free.
A title page preceeds all your paper content. Here, you put all your personal information and this we give out for free.
Without a reference/bibliography page, any academic paper is incomplete and doesnt qualify for grading. We also offer this for free.
Originality & Security
At Homework Sharks, we take confidentiality seriously and all your personal information is stored safely and do not share it with third parties for any reasons whatsoever. Our work is original and we send plagiarism reports alongside every paper.
24/7 Customer Support
Our agents are online 24/7. Feel free to contact us through email or talk to our live agents.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
We work around the clock to see best customer experience.
Our prces are pocket friendly and you can do partial payments. When that is not enough, we have a free enquiry service.
Admission help & Client-Writer Contact
When you need to elaborate something further to your writer, we provide that button.
We take deadlines seriously and our papers are submitted ahead of time. We are happy to assist you in case of any adjustments needed.
Your feedback, good or bad is of great concern to us and we take it very seriously. We are, therefore, constantly adjusting our policies to ensure best customer/writer experience.