Fundamentals of capital budgeting-evaluating cash flows


Elaborate on why the net present value (NPV) of a relatively long-term project is much more sensitive to changes in the cost of capital than is the NPV of a short-term project. Give two illustrations of NPV which support your position.

Examine the reasons explain why the short-term project which you have chosen might be ranked higher beneath the NPV criterion if the cost of capital is high, whereas the long-term project might be deemed better if the cost of capital is low. Find out whether or not changes in the cost of capital could ever cause a change in the internal rate of return (IRR) ranking of two such projects. Give an illustration of such a change-or the lack of one-to support your position.

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Fundamentals of capital budgeting-evaluating cash flows
Reference No:- TGS015864

Expected delivery within 24 Hours