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In: Business and Management

Submitted By nkbutkus
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Dakota State University
BADM 310
Business Finance
Fall 2013

Study Guide

Unit Five: Project Valuations

Reading Assignments Chapter 8: All except 236-238 Chapter 9: All Questions Assignments Chapter 8: None Chapter 9: None

Problems Assignments Chapter 8: 15,16,18,19,26,29 Chapter 7: None

Chapter 8: Net Present Value and Other Investment Criteria 1. Define Net Present Value (NPV) rule and state its criteria. 2. Define Payback period method and state its rule. 3. State the pitfalls of payback period method. 4. What is opportunity cost? Give examples. 5. Define Internal Rate of Return (IRR) and its rule. 6. Define Profitability Index (PI) and its rule. 7. State the similarities and differences between NPV and IRR. 8. State the three pitfalls of IRR. 9. Explain Mutually Exclusive projects. 10. State Why there are multiple IRRs form some projects? 11. Calculate NPV for a project, given relevant information. 10. Calculate the internal rate of return (IRR) on project given relevant information. 11. State soft and hard rationing. 12. Calculate payback period of a project given cutoff period and other relevant information. 13. Calculate Profitability Index given relevant information.

Chapter 9: Using Discounted Cash-flow analysis to make investment decision 1. State why Accounting Incomes differ from Cash flows. 2. State the six factors to be considered for estimating cash flows of a project. 3. Calculate change in working capital for each period over the lifetime of a project. 4. Calculate the incremental operating cash flows for each period over the lifetime of a project. 5. What is sunk cost? Give examples. State the rationale behind the idea of not including sunk cost in the project evaluation. 6. What is opportunity cost?…...

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