1. What effect would you expect the use of MACRS depreciation rules to have on the acceptability of a project having a 10-year economic life but a 7-year MACRS classification?
2. What are the primary types of real options in capital budgeting? Give examples of each type.
1. Calculate the net present value and profitability index of a project with a net investment of $20,000 and expected net cash inflows of $3,000 a year for 10 years if the project's required return is 12 percent. Is the project acceptable?