PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 12, Problem 12PS
Economic income Fill in the blanks: “A project’s economic income for a given year equals the project’s ____ less its ____ depreciation. New projects may take several years to reach full profitability. In these cases, book income is ____ than economic income early in the project’s life and ____ than economic income later in its life.”
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Which of the following would DECREASE the NPV of a project being considered, other things held constant?
Group of answer choices
Spreading over the initial investment over the first two years rather than making it in the first year.
A decrease in net working capital in year 1.
A decrease in the cost of capital for the project.
All of the changes would increase the NPV of a project.
A shift from straight line to MACRS depreciation method.
We are analyzing a project and have gathered the following data. Based on this data, what is the average accounting rate of return? The project's assets will be depreciated using straight-line depreciation to a zero book value over the life of the project.
Year Cash Flow Net Income 0 $285,000 n/a
1 $83,650 $12,400
2 $92,850 $21,600
3 $94,350 $23,100
4 $93,250 $22,000
Other things held constant, which of the following would increase the NPV of a project being considered?
A shift from straight-line depreciation to MACRS
Making the initial investment in the first year rather than spreading it out over the first three years
An increase in the discount rate associated with the project
An increase in required net operating working capital
None of the above
Chapter 12 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 2PSCh. 12 - Prob. 3PSCh. 12 - Prob. 4PSCh. 12 - Prob. 5PSCh. 12 - Prob. 6PSCh. 12 - Management compensation We noted that management...Ch. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Prob. 11PSCh. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Economic income Consider the following project:...Ch. 12 - Accounting measures of performance Use the Beyond...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Prob. 17PSCh. 12 - EVA Here are several questions about economic...Ch. 12 - EVA Herbal Resources is a small but profitable...Ch. 12 - Prob. 20PSCh. 12 - EVA Use the Beyond the Page feature to access the...Ch. 12 - EVA Ohio Building Products (OBP) is considering...
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