Should a company ever accept a negative NPV project?
Should a company ever accept a negative NPV project?
Should a company ever accept a negative NPV project?
Is it useful to use spreadsheets for financial forecasting?
How do independent projects compare to mutually exclusive projects?
Suppose you are a corn farmer in your home state. You have to decide between two projects. One project is to purchase new equipment for your farm that will help boost your profits for the next ten years. You also find out that you can purchase a large banana farm in Brazil for the same price as the equipment, and at current market prices for bananas you will make a lot more profit than you would from purchasing new corn farming equipment.
After asking around, you find out that the standard discount rate for evaluating the NPV of farming project is 6%. Most farmers in your home state seem to use this rate successfully. However, you don’t know any other banana farmers and you don’t know too much about farming in Brazil so you have to make a guess on an appropriate discount rate for the Brazilian banana farm. Based on the concepts from the background readings, would you say the Brazilian banana farm will need a lower or higher discount rate? A lot larger or smaller, or only a little?
Pick one of the companies on the Dow Jones Industrial Average (DJIA) and call up their financial information on Google. You can Google to get a list of the companies on the DJIA. Take a look at their financial information and tell us any interesting trends that you see. For example, have sales gone up, down or maybe they have remained flat. What about net income? If you see a big trend, dig a little deeper and see what management or then markets have to say about this trend. Will it continue or is it expected to reverse? Also, comment on what your fellow classmates post.
Part 2: Do you know what the Futures Market is? What is the Eurodollar contract? How is it related to the Fed Funds Contract. The Eurodollar contract for September 2015 is forecasting a rise in interest rates of about .5%. Do you agree with this prediction? Why?
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