A firm uses a single discount rate to compute the NPV of all its potential capital budgeting projects, even though the projects have a wide range of nondiversifiable risk. The firm then undertakes all those projects that appear to have positive NPVs. Briefly explain why such a firm would tend to become riskier over time.
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Phyllis believes that the firm should use straight-line depreciation for a capital project because it results in higher net income during the early years of the project’ s life. Joanna believes that the firm should use the modified accelerated cost recovery system depreciation because it reduces the tax liability during the early years of the project’ s life. Assuming you have a choice between depreciation methods, whose advice should you follow? Why?
FIN 571 Week 4 Individual Assignment Analyzing Pro Forma Statements
A firm uses a single discount rate to compute the NPV of all its potential capital budgeting projects, even though the projects have a wide range of nondiversifiable risk. The firm then undertakes all those projects that appear to have positive NPVs. Briefly explain why such a firm would tend to become riskier over time.
************************************************************************************* FIN 571 Week 4 DQ 2 FOR MORE CLASSES VISIT www. fin571tutor. com
Phyllis believes that the firm should use straight-line depreciation for a capital project because it results in higher net income during the early years of the project’ s life. Joanna believes that the firm should use the modified accelerated cost recovery system depreciation because it reduces the tax liability during the early years of the project’ s life. Assuming you have a choice between depreciation methods, whose advice should you follow? Why?
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FIN 571 Week 4 Individual Assignment Analyzing Pro Forma Statements
FOR MORE CLASSES VISIT www. fin571tutor. com