What are the primary strengths and weaknesses of the Net Present Value method of capital budgeting?
What will be an ideal response?
The major strength of the net present value method is that it takes into account the time value of money through the discount rate. It implicitly makes the reasonable assumption that any interim cash flows from the project are reinvested at the firm's cost of capital. One weakness of the net present value method is that it provides an answer in dollar terms while many managers focus on percentage returns when assessing projects. The greatest challenges with the net present value approach are determining realistic cash flow estimates and estimating an appropriate hurdle rate.
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Financial reform after the recent economic crisis has been most concerned with which of the following:
a. decreasing government oversight. b. increasing the amount of executive pay and bonuses. c. holding Wall Street firms accountable for their actions. d. increasing the size of the largest financial firms. e. loosening regulations for major financial firms.
What does the "equal dignity rule" require?
A) Consideration to support a contract B) That the writing required by the Statute of Frauds meets certain requirements C) That contracts for the sale of goods over a certain dollar amount be in writing D) That the contract of an agent to sell property covered by the Statute of Frauds must be in writing for the sale of the property to be enforceable E) That an offer and an acceptance be mirror images of each other