Week 6: Capital Budgeting Summary

1. What types of projects require the least detailed and the most detailed analyses in the capital budgeting process?
2. When two mutually exclusive projects are being compared, explain why the short-term project might be ranked higher under the NPV criterion if the cost of capital is high, whereas the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in IRR ranking of two such projects? Why or why not?