LO1. What is capital budgeting? a) What are the steps for the capital budgeting process: ) in) iv) b) What are the four popular methods of analyzing potential capital investments 1) in) iii) iv) c) In your own words, what is capital rationing? d) Identify if the following is a cash inflow (I) or cash outflow (O): 1) Initial investment (acquisition cost) Residual value Revenue generated from investment IV) Additional operating costs LO2. How do the payback and accounting rate of return methods work? a) If the amount invested is $100,000 and the yearly expected cash flows are $20,000 per year, what is the payback period? b) If the amount invested is $100,000, the residual value is $20,000 and the average annual operating income is $10,000, what is the ARR? LO3. What is the time value of money? a) Using the tables provided in Appendix A, if the future value of an investment five years from now needs to be $10,000, what is the present value? Assume the interest rate is 6% b) Using the tables provided in Appendix A. if you would like to receive $1,000 per year for the next five years, how much would you have to invest today, assuming 6% interest LO4. How do discounted cash flow methods work? ) ABC Company is considering a project with an initial investment of $600,000 that is expected to produce cash inflows of S100,000 per year for 5 years. The required rate of retum is 14% 1) What is the NPV of the project? Based on your answer, should ABC Company invest in this project