Explain why we use the overall cost of capital for investment decisions even when only one source of capital will be used?
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Explain why we use the overall cost of capital for investment decisions even when only one source of capital will be used?
Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)? Suppose a firm estimates its weighted average cost of capital (WACC) to be 10%. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be “reasonable” costs of capital for average, high and low-risk projects?
1. Payback period is one of the nondiscounting models used in capital investment decisions. What are some of the pros and cons associated with this model? 2. What is a capital investment and why do companies need to evaluate whether to make the investment or not? 3. Why do come companies prefer to use discounting in their capital investment decisions? What is a risk associated with this discounting model?
Overall Explain to "The Boss" what integrals are used to calculate and why we need to use them. (He doesn't want to hear that integrals are the area under a curve).
Instructions: You learned about how businesses use capital budgeting tools to evaluate long-term investment decisions. We may be using these techniques (even if subconsciously) to make some personal life decisions. In this discussion, I encourage you to think about one such decision: your decision to attend UTRGV. Attending college has direct and opportunity costs, and you expect to benefit from this decision in the future. Think about and note down the following. Use rough approximations. 1. What is your cost of...
Why is the discounted cash flow method for capital budgeting decisions considered better than other methods? Can the payback method be helpful when choosing among investment alternatives? If so, explain how
Why do we use after-tax cost of debt but not after-tax cost of equity when calculating the weighted average cost of capital (WACC)?
What are the two primary sources of equity capital? Explain why there is a cost to using reinvested (retained) earnings; that is, why aren’t reinvested earnings a free source of capital?
(Divisional costs of capital and investment decisions) In May of this year, Newcastle Mfg. Company's capital investment review committee received two major investment proposals. One of the proposals was put forth by the firm's domestic manufacturing division, and the other came from the firm's distribution company. Both proposals promise a return on invested capital to approximately 15 percent. In the past, Newcastle has used a single firm-wide cost of capital to evaluate new investments. However, managers have long recognized that...
Question 3: When we make decisions, we are influenced by our emotions a) Explain the positive and negative effects of emotions in decision making. (b) Provide one (1) suitable example for each based on your experience that show: i. the positive effect of emotions; and ii. the negative effect of emotions in decision making
If an investment project (with conventional cash flows) has IRR equal to the cost of capital, the NPV for that project is: Positive Negative Zero Unable to determine Question 13 (2 points) The following are measures used by firms when making capital budgeting decisions except: Payback period Internal rate of return P/E ratio 1. Net present value