BUS 401 final project Caledonia products - BUS401 final project Caledonia products (Use as a guide)

Feb 3rd, 2012
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Should Caledonia focus on cash flows or accounting profits in making its capital-budgeting decisions? Should the company be interested in incremental cash flows, incremental profits, total free cash flows, or total profits? • b. How does depreciation affect free cash flows? • c. How do sunk costs affect the determination of cash flows? • d. What is the project’s initial outlay? • e. What are the differential cash flows over the project’s life? • f. What is the terminal cash flow? • g. Draw a cash flow diagram for this project. • h. What is its net present value? • i. What is its internal rate of return? • j. Should the project be accepted? Why or why not? • k. In capital budgeting, risk can be measured from three perspectives. What are those three measures of a project’s risk? • l. 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

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