Cost of capital on the investments


Question 1. What happens to a firm that fails to earn at least its cost of capital on the investments it makes?

Question 2. Under what circumstances would a project’s NPV profile cross the x-axis more than one time? 

Question 3. Are sunk costs included in the cash flow figures used in capital budgeting analysis?  Explain.

Question 4. What kind of risk increases as a firm piles more debt onto its balance sheet?

Question 5. Define “mutually exclusive projects.”

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Finance Basics: Cost of capital on the investments
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