Question 1: We use WACC as discount rate to find the present value of future cash flows emerging from a project, so it is of immense importance to calculate the correct WACC.
And you are also aware that if the WACC is incorrect it may lead to serious consequences.
Could you expand on this?
Question 2: If a firm decides it will only fund projects with a specific high rate of return what might happen to the risks and cost of funds for the firm over time?
Question 3: Why would a company focus on short term cash inflows and use the payback method as a capital project decision-making tool?
Question 4: Why would the payback method still be used frequently in companies? Are there times when the payback method can be used effectively and for what types of projects?
Question 5: If we consider how sunk costs relate to making business decisions, how do sunk costs figure into incremental analysis?
Question 6: Can anyone think of examples of how we make use of sensitivity analysis in our job functions and decision-making?
Question 7: In thinking of how our organizations approach new project decision-making, what process is used? What types of tools are used to evaluate projects and are there guidelines used for expected returns?
Question 8: Using a SWOT analysis is a good part of the strategic planning process. Once a list of potential projects are selected is there a means of forecasting financial results through the use of payback, IRR, MIRR, or NPV?