Managerial Finance

Mod 7 DQ1

Summarize the pros and cons of the six capital budgeting methods. In what types of situations would capital budgeting decisions be made solely on the basis of project’s Net Present Value (NPV)? Identify potential reasons that might drive higher NPV for a given project. Substantiate your response by providing an example to explain your thought process.

Mod 7 DQ2

Explain how the Federal Reserve Bank's (Fed) decision to raise interest rates would be expected to affect each component of the Weighted Average Cost of Capital (WACC). What four mistakes are commonly made when estimating the WACC, and how do these mistakes arise? If the Fed decides to increase the interest rates significantly, how would that impact your capital budgeting decision?