Most firms generate cash inflows every day, not just once at the end of theyear. In capital budgeting, should we recognize this fact by estimating dailyproject cash flows and then using them in the analysis? If we do not, will thisbias our results? If it does, would the NPV be biased up or down? Explain.

Smaller firms often use Payback, as opposed to NPV or some other more sophisticated capital budgeting technique. Why do you suppose that occurs?

Why does WACC increase and IRR decrease as the capital budget increases? Are there any steps management can take to reverse these trends?

explain why it is important to understand that capital budgeting is subject to the validity of the forecasted data.  Additionally, explain whether this reduces the reliability of these types of tools.  Are there any other alternatives, or are these tools some of the most reliable that currently exist?

Your professor mentioned one capital budgeting tool that he had "never" seen used in the "real world." Which one was that? O Profitability Index O Internal Rate of Return O Capitalization Rate O Net Present Value O Payback Period

When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O increases stays the same decreases

be appropriate? Explain. 8.4 Average Accounting Return Concerning AAR: LO 2 Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule? a. b. What are the problems associated with using the AAR as a means of evaluating a project's cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?

The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions. Consider the case of Green Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Alpha’s expected future cash flows. To answer this question, Green Caterpillar’s CFO has asked that you compute the project’s payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year.   Complete the following table and compute the project’s conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.)   Year 0 Year 1 Year 2 Year 3 Expected cash flow -$4,500,000…

we can still calculate the IRR on incremental cash flows. True or false? Explain with example?

The Profitability Index  (PI) is a financial metric that depends only on the Present Value (PV) of expected future cash inflows. This statement is:  a False.  b Only partly true.  c True  d Only partly false.