Describe how income taxes affect the cash flows of a strategic investment.
Suppose a company has five different capital budgeting projects from which to choose, but has constrained funds and
cannot implement all of the projects. Explain why comparing the projects’ NPVs is better than comparing their IRRs.
Describe the pros and cons of each of the capital budgeting methods learned in this chapter: (a) net present value, (b)
internal rate of return, (c) payback, and (d) accrual accounting rate of return.
When projects have longer lives, it is more difficult to accurately estimate the cash flows and discount rates over the life
of the project. Explain why this statement is true.
If a firm has unlimited funds, what quantitative criterion should be used to determine which projects to invest in?
An international firm requires a rate of return of 15% domestically and in developed countries, but 25% in less–
developed countries. Does this requirement mean that the firm is exploiting the less–developed countries?
When we learned CPV analysis in Chapter 3, we calculated the amount of pretax profit needed to achieve a given level of
after–tax profit. We could calculate a pretax rate of return given an after–tax rate of return. Why would it be inappropria
