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30% chance that the growth option would be exercised, and only a
10% chance that the implementation of certain phases of the project
would affect timing. a.Use the information provided to calculate the
strategic NPV, NPVstrategic, for Asor Products’ proposed equipment
expenditure. b.Judging on the basis of your findings in part a, what
action should Jenny recommend to management with regard to the
proposed equipment expenditure? c.In general, how does this problem
demonstrate the importance of considering real options when making
capital budgeting decisions? P12–19 Capital rationing: NPV approach
A firm with a 13% cost of capital must select the optimal group of
projects from those shown in the following table, given its capital
budget of $1 million. LG 6 a.Calculate the present value of cash
inflows associated with each project. b.Select the optimal group of
projects, keeping in mind that unused funds are costly.
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FIN 486 Week 4 Individual Assignment Capital Budgeting
Scenarios
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FIN 486 Week 4 Individual Assignment Capital Budgeting Scenarios
Choose a scenario from the Capital Budgeting Worksheet to review
and analyze. Using net present value, determine the proposal’s
appropriateness and economic viability.
Prepare a 500-word report explaining your calculations and
conclusions. Answer the following in your report:
Explain the effect of a higher or lower cost of capital on a firm’s long-
term financial decisions.