Question 1-4:
A.) Would a firm undertake an investment with an NPV (Net Present Value) of zero? If
so, why?
B.) How can firms position new ventures to have NPVs (Net Present Value) of greater
than zero? What are some strategies for that?
Question 1-5:
A.) Why are interest charges on debt not deducted when determining a project’s net cash
flows as part of the capital budgeting process?
Question 1-6:
A.) In terms of the capital structure of a firm, we know that there are significant differences
among industries and even among firms within industries. Discuss the factors that go
into the determination of the “optimal” level of debt a firm should carry. List factors and
then discuss.
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