Which capital budgeting method is considered to be the best for comparing projects

Subject: Business    / Finance
Question

Which capital budgeting method is considered to be the best for comparing projects?

Net present value

Internal rate of return

Payback method

Discounted payback method

Profitability index

Consider a firm with no preferred stock. Calculate the after-tax weighted cost of capital for the firm if it has $5,000,000 in debt at a cost of 8% and $15,000,000 in equity at a cost of 12%. The firm’s tax rate is 30%.

9.6%

10.4%

11.2%

12.8%

20%

A firm has a capital structure of 25% debt and 75% equity. The YTM on outstanding debt is 9%, the current return on the market is 12%, the risk-free rate is 8%, the firm’s beta is 1.5 and the corporate tax rate is 40%. What is the firm’s after-tax weighted average cost of capital?

8.4%

8.85%

9.75%

10%

11.85%

Toni’s Insurance must choose between two types of printers. Both printers meet the firm’s quality standard. Printer A costs $4,445 and is expected to last 3 years. Printer B costs $3,194 and is expected to last 2 years. Assume a discount rate of 10%. Which printer should Toni’s Insurance purchase? What is the equivalent annual cost (EAC) of this selected printer?
~

Printer B; $3,194

Printer A; $1,625

Printer B; $2,904

Printer A; $1,787