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Ierofanga [76]
2 years ago
8

A firm must choose from six capital budgeting proposals outlined below. The firm is subject to capital rationing and has a capit

al budget of​ $1,000,000; the​ firm's cost of capital is 15 percent. Please show the work.
Project Initial Investment IRR NPV
1 $200,000 19% $100,000
2 400,000 17 20,000
3 250,000 16 60,000
4 200,000 12 -5,000
5 150,000 20 50,000
6 400,000 15 150,000

Using the internal rate of return approach to ranking projects, which projects should the firm accept?

Using the net present value approach to ranking projects, which projects should the firm accept?
Business
1 answer:
MaRussiya [10]2 years ago
8 0

Answer:

On IRR basis projects 1, 2, 3, and 5 will be selected.

On NPV basis projects 1, 3, 5,  and 6 will be selected.

Explanation:

The firm will accept or choose all the project that has a higher or equal internal rate of interest than cost of capital. However, in the given case project 4 has a lower internal rate of interest (12 percent) than the cost of capital. Thus, projects 1, 2, 3, and 5 will be chosen by the firm. While the firm has budget constraints so it will have no money for projects 4 and 6.

The firm will select all the projects with positive NPV when there is no budget constraint. But in case of budget constraint, the firm will select the project that has high NPV. Thus, Project 1, 6, 3, and 5 will be selected and there will be no money left for projects 2 and 4.

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When launching a new brand, it is best to build the brand first with PR, and then with advertising is explained in the following way

Explanation:

In the past, almost every new brand was launched with a big advertising campaign. In today's media environment, that's not a good idea. Advertising is expensive and not very credible, especially when used on behalf of a new brand. That's why many of the most successful new brands were launched with PR.

Launching a new brand with PR, however, raises a number of questions.If no advertising agency is involved, who does the positioning strategy.

To stimulate your thinking about these ,here is an outline of six steps a PR launch might take.

1. The leak -A PR program usually starts with a leak to key reporters and editors. Internet sites are often favorite targets.

But no big brand has ever been successful in a category with no competition. The best thing that ever happened to Coca-Cola is Pepsi-Cola.

Not a good idea. The more competitors in a category, the larger the category. Competition creates enormous consumer interest in the category and stimulates a lot of PR.

Advertising is different. An advertising program is launched like a D-day attack. It's usually kept a top secret until the day the first ad runs.

It would have been better to let the PR run for a few months before launching the advertising. In turn, the ads could then focus on the success of the launch. (Nothing succeeds like success.)

2. The slow buildup

A PR program slowly unfolds like a flower blooming. A company has to allot enough time for the PR to develop momentum. That's why a PR launch often starts before the details of a new product or service are firmly fixed.

Advertising is different. An advertising program usually starts with a "big bang." Since consumers tend to ignore advertising messages, a new ad program needs to be big and bold enough to get above the "noise level."

3. The recruitment of allies

Why go it alone when you can get others to help communicate your message? The slow buildup of a PR program allows enough time to recruit allies to your cause.

Advertising is different. With a big-bang launch, there usually isn't enough time to line up supporters. Also, advertising alliances usually fall apart over the question of who pays for what.

4. Product modification

Feedback is an important element in a PR launch. By launching the PR program ahead of the actual product introduction, t

Advertising is different. Once a big-bang advertising program is launched, a company is committed.

5. Message modification

Feedback from a PR program also allows a company to modify the brand's message for greater consumer appeal.

6. The soft launch

PR versus advertising

In almost every way, the launch of a brand via PR is exactly the opposite of how a brand is currently launched with an advertising program.

5 0
2 years ago
If expected return is less than required return on an​ asset, rational investors will​ ________.
DedPeter [7]
Sell the asset, which will drive down the price and cause the expected return to reach the level of the required return.
6 0
2 years ago
Colortrigon Company makes a variety of paper products. One product is 30 lb copier paper, packaged 3,000 sheets to a box. One bo
Valentin [98]

Answer:

d.Yes, income will increase by $30,000

Explanation:

The net profit from this order = Revenue – all expense related = number of unit sold x (price per unit – cost per unit) =  

6,000 boxes x (price $15 – Direct materials $6 - Direct labor $2 - Variable overhead $2 - Fixed overhead $3 but avoidable) = 6000 x (15-6-2-2-0) = $30,000

8 0
2 years ago
Zoe buys 50 pounds of frozen peaches each month to make her famous peach cobbler that she sells in her bakery. If Zoe believes t
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Please forgive me if I’m wrong
I think it would be a.true
7 0
1 year ago
Cold Boxes Ltd. has 100 bonds outstanding (maturity value = $1,000). The nominal required rate of return on these bonds is curre
pentagon [3]

Answer:

correct option is c.4%

Explanation:

given data

maturity value = $1,000

nominal rate of return r = 10 percent  = 5 % semi annually = 0.05

mature time t = 5 years  = 10  semi annually

current market value = $768

solution

we apply here present value formula that is

present value = coupon rate × maturity value × \frac{1-(1+r)^{-t}}{r} + \frac{mature\ value}{(1+r)^{-n}}   ..............1

put here value and we get

$768 =  coupon rate × $1000 ×  \frac{1-(1+0.05)^{-10}}{0.05} ×  \frac{1000}{(1+0.05)^{-10}}

solve it we get

coupon rate  = 1.99549 %  Semi-annual

so here annual coupon interest rate is = 2 × 1.99549 %

annual coupon interest rate is 3.99 = 4%

so correct option is c.4%

8 0
2 years ago
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