Question 1. In your own words, explain the concept of cost of capital. How may cost of capital affect long-term financial decisions? Would a company prefer to have a high or low cost of capital? Why? What was the effect of cost of capital on long-term financial decisions for your company?
Question 2. Why is capital budgeting part of a company's long-term strategic planning process? What are the pros and cons of these methods:
o NPV
o Simple payback
o IRR
Which would you recommend using? Why? Would your recommendation differ based on the size of the company? If so, why? If not, why?