FIN 501 CASE Module 3 – Case Capital Budgeting and the Cost of Capital

1. The table below gives the initial investment and expected cash flows over the next five years for two different projects. Assume that the industry you are in expects a return of 10%, which you use as the discount rate in net present value (NPV) calculations and as the required rate of return for purposes of deciding on projects. Also, assume that management only wants to invest in projects that pay off within four years.

Setting Goals

1.Briefly list any financial problems you face personally or as a household, such as too much debt not enough savings, or not enough income.

2.Describe your personal and household financial goals, such as paying off debt or earning more income. Include short-term, intermediate-term, and long-term goals.

3.Develop a list of practical solutions to help solve the financial problems and reach the financial goals identified above.