Problem 1. What is meant by a company's "internal rate of return" and why is it important to use as a metric? What do some of the websites ( i.e. Zenwealth, Investopedia and Wikipedia) say about IRR?
Problem 2. What are the strengths and weaknesses of the payback method of ranking project proposals as compared to other methods? What method of comparing investment proposals do you favor and why?
Problem 3. The Treasurer of a global Fortune 1000 company is considering investing $50 million in 10 year U.S. Treasury Notes that yield 3.5%. The company's WACC is 6.0%.
Problem 4: Is this a good decision to make an investment that is less than the company's WACC (essentially a negative NPV project)? Explain.
Problem 5: What should the ROI or target yield be on investments for a company with a 6.0% WACC? Explain.