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Briefly answer in Excel the questions that follow (each question is worth 5 points). An answer of 1-3 sentences for each question should suffice. A:
Briefly answer in Excel the questions that follow (each question is worth 5 points). An answer of 1-3 sentences for each question should suffice.
- A: What interest rate do we use to discount the cash flows when computing bond price?
- B: When considering two mutually exclusive projects, if NPV gives one conclusion and IRR gives another, which one should we default to? Why?
- C: What alternative approach to estimate the project discount rate (or cost of capital) did we talk about in class if the riskiness of the project differs from the riskiness of the firm?
- D: When computing project cash flows, should we add or subtract net working capital investments? What about investments in PP&E (or capital expenditures)?
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