my question is Q12, capital budgiting in non for ptofit entities, thank you !
in managers use b. What is the relatONSHIP BULWCUIR Uns in you might prefer one method over the other? Explain c. Despite its shortcomings in some situations, why do most financial manager IRR along with NPV when evaluating projects? Can you think of a situatie which IRR might be a more appropriate measure to use than NPV? Explain. 8. Profitability Index [LO7] Concerning the profitability index: a. Describe how the profitability index is calculated, and describe the informatie this measure provides about a sequence of cash flows. What is the profitab index decision rule? b. What is the relationship between the profitability index and NPV? Are there situations in which you might prefer one method over the other? Explain. Payback and Internal Rate of Return [LO2, 5) A project has perpetual cash flows of C per period, a cost of /, and a required return of R. What is the relationship between the project's payback and its IRR? What implications does your answe have for long-lived projects with relatively constant cash flows? International Investment Projects [LO1] In March 2014, automobile manufac. turer BMW announced plans to invest $1 billion to increase production at its South Carolina plant by 50 percent. BMW apparently felt that it would be better able to compete and create value with U.S-based facilities. Other companies such as Fuji Film and Swiss chemical company Lonza have reached similar conclusions and taken similar actions. What are some of the reasons that foreign manufacturers of products as diverse as automobiles, film, and chemicals might arrive at this same conclusion? 11. Capital Budgeting Problems (LO1] What difficulties might come up in actual applications of the various criteria we discussed in this chapter? Which one would be the easiest to implement in actual applications? The most difficult? 12. Capital Budgeting in Not-for-Profit Entities (LO1] Are the capital budgeting criteria we discussed applicable to not-for-profit corporations? How should such entities make capital budgeting decisions? What about the U.S. government? Should it evaluate spending proposals using these techniques? 13. Modified Internal Rate of Return (LO6] One of the less flattering interpretations of the acronym MIRR is "meaningless internal rate of return." Why do you think this term is applied to MIRR? Net Present Value [LO1] It is sometimes stated that the net present value approach assumes reinvestment of the intermediate cash flows at the required return." Is this claim correct? To answer, suppose you calculate the NPV of a project in the usual way. Next, suppose you do the following: a. Calculate the future value (as of the end of the project) of all the cash flows other than the initial outlay assuming they are reinvested at the required return, producing a single future value figure for the project
