Colossians 3:23-24 says, whatever you do, whatever kind of work you are doing, work heartily, with all your heart and all the different ways that plays out in scripture, with Christ-like character, with honesty, with diligence, with integrity, with humility. So work heartily as for the Lord and not for men.  Does this instruction from the Bible have relevance to your effort in this course? your work? your relationships? What are three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain. What is a mutually exclusive project? How should managers rank mutually exclusive projects? Project X is very risky and has an NPV of $3 million. Project Y is very safe and has an NPV of $2.5 million. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain. Discuss the following statement: If a firm has only independent projects, a constant WACC, and projects with normal cash flows, the NPV and IRR methods will always lead to identical capital budgeting decisions. What does this imply about the choice between IRR and NPV? If each of the assumptions were changed (one by one), how would your answer change?

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
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  1. Colossians 3:23-24 says, whatever you do, whatever kind of work you are doing, work heartily, with all your heart and all the different ways that plays out in scripture, with Christ-like character, with honesty, with diligence, with integrity, with humility. So work heartily as for the Lord and not for men.  Does this instruction from the Bible have relevance to your effort in this course? your work? your relationships?
  2. What are three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain.
  3. What is a mutually exclusive project? How should managers rank mutually exclusive projects?
  4. Project X is very risky and has an NPV of $3 million. Project Y is very safe and has an NPV of $2.5 million. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain.
  5. Discuss the following statement: If a firm has only independent projects, a constant WACC, and projects with normal cash flows, the NPV and IRR methods will always lead to identical capital budgeting decisions. What does this imply about the choice between IRR and NPV? If each of the assumptions were changed (one by one), how would your answer change?
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