Please answer all questions.

1. Given the goal of maximization of firm value and shareholder wealth, we have stressed the importance of net present value (NPV). And yet, many financial decision-makers at some of the most prominent firms in the world continue to use less desirable measures such as the payback method. Discuss why you think this is the case.

2. Most financial experts will agree that net present value is the best capital budgeting method. Explain why this is so and also explain how even NPV can be unreliable when projecting project results.

3. When is it appropriate to use the equivalent annual cost (EAC) methodology, and how do you make a decision using it?

4. In working on a bid project you have determined that $318,000 of fixed assets will be required and that they will be depreciated straight-line to zero over the 6-year life of the project. You have also determined that the discount rate should be 18 percent and the tax rate will be 35 percent. In addition, the annual cash costs will be $198,200. After considering all of the projects cash flows you have determined that the required operating cash flow is $92,400. What is the amount of annual sales revenue that is required?

5. Should financing costs be included as an incremental cash flow in capital budgeting analysis? Explain.