Project cash flow C0 C1 C2 C3 C4 A -5000 +1000 +1000 +3000 0 B -1000 0 +1000 +2000 +3000 C -5000 +1000 +1000 +3000 +5000 If the opportunity cost of capital is 10%, which projects have positive NPVs? How do you know? “If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” Is this statement true or false? How do you know? If the firm uses the discounted-payback rule, will it accept any negative NPV projects? Will it turn down any positive NPV projects? How do you know? Please use the calculator. net for explanation. or any other free onling
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
| Project | cash flow | ||||
| C0 | C1 | C2 | C3 | C4 | |
| A | -5000 | +1000 | +1000 | +3000 | 0 |
| B | -1000 | 0 | +1000 | +2000 | +3000 |
| C | -5000 | +1000 | +1000 | +3000 | +5000 |
- If the
opportunity cost of capital is 10%, which projects have positive NPVs? How do you know? - “If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” Is this statement true or false? How do you know?
- If the firm uses the discounted-payback rule, will it accept any negative NPV projects? Will it turn down any positive NPV projects? How do you know? Please use the calculator. net for explanation. or any other free onling
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I think question 3 is not answered clearly.
If Project A is rejected due to negative
Question 3)
If the firm uses the discounted-payback rule, will it accept any negative NPV projects? Will it turn down any positive NPV projects? How do you know?
Your answer is:
No
Due to Project A's negative NPV, it cannot cover the initial investment within its useful life.
Will it turn down any positive NPV projects?
It will reject projects with positive NPVs but not those with negative NPVs. If all potential cash flows are taken into account but the project still doesn't reach the designated cutoff point, the NPV can still be positive.
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