1. What are some of the difficulties that might come up in actual applications of the various criteria we discussed in Capital Budgeting?
2. Given the goal of maximization of firm value and shareholder wealth, we have stressed the importance of 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 period and average accounting return (AAR). Why do you think this is the case?
3. Discuss the relationship between NPV and IRR and explain the limitations of IRR.