CHOOSE A TRADING/MANUFACTURING COMPANY LISTED ON ANY STOCK MARKET. WITH RESPECT TO YOUR CHOSEN COMPANY, ANSWER THE FOLLOWING QUESTIONS.

1. What is the difference between capital budgeting screening decisions and capital budgeting preference decisions? 2. What is meant by the term discounting?

3. Why isnt accounting net income used in the net present value and internal rate of return methods of making capital budgeting decisions?

4. What is net present value? Can it ever be negative? Explain.

5. If a company has to pay interest of 14% on long-term debt, then its cost of capital is 14%. Do you agree? Explain. 6. As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.

7. What is meant by the term payback period? How is the payback period determined? How can the payback method be useful?

8. What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?