FIN/370 Week 4 Caledonia Project Paper
FIN 370 WEEK 4 CALEDONIA PRODUCTS PAPER
- Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project?
- What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings?
- What is the project’s initial outlay?
- Sketch out a cash flow diagram for this project
- What is the project’s net present value?
- What is its internal rate or return?
- Should the project be accepted? Why or why not?
- In capital budgeting, risk can be measured from three perspectives. What are those three measures of a project’s risk?
- According to the CAPM, which measurement of a project’s risk is relevant? What complications does reality introduce into the CAPM view of risk, and what does that mean for our view of the relevant measure of a project’s risk?
- Explain how simulation works. What is the value in using a simulation approach?
- What is sensitivity analysis and what is its purpose?