Fundamentals of finanace

 Module 5 Assignment;

1. In the context of capital budgeting, what is an opportunity cost?

2. Given the choice, would a firm prefer to use MACRS depreciation or straight-line depreciation? Why?

3. In our capital budgeting examples, we assumed that a firm would recover all of the working capital it invested in a project. Is this a reasonable assumption? When might it not be valid?

4. Suppose a financial manager is quoted as saying, “Our firm uses the stand-alone principle. Because we treat projects like minifirms in our evaluation process, we include financing costs because they are relevant at

the firm level.” Critically evaluate this statement