In your own words, describe the four primary methods for assessing the viability of capital projects.

What are the issues in the upcoming negotiation?
January 2, 2020
Module 5 Revised
January 2, 2020

 If you were to choose a method or combination of methods to assess the viability of a capital project, what method(s) would you chose and why? Your answer should be in your own words.

2. In your own words, describe the four primary methods for assessing the viability of capital projects.

3. If you were the CEO of your organization and were faced with a cash-rich scenario, would you use the cash to issue dividends or buy back stock? What impact would your decision have on earnings per share? Justify and defend your choice with sound reasoning. Your answer should be in your own words.

4. What are the three elements of the Weighted Average Cost of Capital formula? Which of the elements are impacted by taxes? Your answer should be in your own words.

5. When using the Internal Rate of Return method to assess capital projects, what is a common pitfall that might occur if an organization consistently chooses projects with the highest IRR? Your response should be in your own words.

6. What are the five key ways free cash flow is used? How does this relate to an organization s financial plan?

7. If you had started your own business and were contemplating expansion, would you choose to finance your expansion with debt or equity? Justify and defend your choice with sound reasoning. Your answer should be in your own words.

8. What are the key strengths and weaknesses of the Internal Rate of Return method of assessing capital projects? Your answer should be in your own words.

9. Which capital evaluation methods take into consideration the time value of money? What is the time value of money an important element of the capital budgeting process? Your response should be in your own words.

 

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