Assignment
1. What are the five key ways free cash flow is used? How does this relate to an organization s financial plan?
2. Outline the basic formula for the Weighted Average Cost of Capital and explain how it is used in the capital budgeting process. Your answer should be in your own words
3. Which capital evaluation methods take into consideration the time value of money? What is the time value of money an important element of the capital budgeting process? Your response should be in your own words.
4. What are the key strengths and weaknesses of the payback method of assessing capital projects? Your answer should be in your own words
5. Explain the basic premise of the Signaling Hypothesis. How does this impact the dividend policy implemented by the firm? Your response must be in your own words
6.What are the key strengths and weaknesses of the Internal Rate of Return method of assessing capital projects? Your answer should be in your own words.
7. If you were the CEO of a company for a day, what dividend policy would you implement? Justify and defend your policy with evidence and sound reasoning. Your answer should be in your own words.
8. What is sensitivity analysis and what role does it play in the capital budgeting process? Your answer should be in your own words.
9.What are the key strengths and weaknesses of the Net Present Value method of assessing capital projects? Your answer should be in your own words.
10. Explain the basic premise of the Clientele Effect. How does this impact the dividend policy implemented by the firm? Your response must be in your own words.