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Explain all in detail and support your argument using the financial concepts that are consistent with the book. (10 points) Make distinctions between the net
Explain all in detail and support your argument using the financial concepts that are consistent with the book.
- (10 points) Make distinctions between the net present value (NPV) and the profitability (PI) method in the capital budgeting analysis.
- (10 points) Explain in detail what the weighted average cost of capital (WACC) is and the role it plays in capital budgeting.
- (10 points) Explain what is meant by the incremental cash flow and tell me why the incremental cash flow is only relevant for the capital budgeting analysis.
- (10 points) What are flotation costs and why must they be included in the initial cost of a project? Explain in detail.
5. (10 points) Make distinctions between the standard deviation and beta in the measurement of risk in the capital market. Which one of these two metrics (standard deviation and beta) is relevant for measuring the risk of well-diversified portfolio? Explain why.
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