• Compare and contrast the internal rate of return approach to the net present value approach
Beta and Capital Budgeting
Part 1: Beta
Visit the following web site or other websites:
- Search for the beta of your company (Group Project)
- In addition, find the beta of 3 different companies within the same industry as your company (Group Project).
- Explain to your classmates what beta means and how it can be used for managerial and/or investment decision
- Why do you think the beta of your company (individual project) and those of the 3 companies you found are different from each other? Provide as much information as you can and be specific.
Part 2: Capital Budgeting
Before you respond to Part 2 of discussion 6 review the following information on Capital Budgeting Techniques
Capital Budgeting Decision Methods
CAPITAL BUDGETING (PRINCIPLES & TECHNIQUES)
To avoid damaging its market value, each company must use the correct discount rate to evaluate its projects. Review and discuss the following:
• Compare and contrast the internal rate of return approach to the net present value approach. Which is better? Support your answer with well-reasoned arguments and examples.
• Is the ultimate goal of most companies–maximizing the wealth of the owners for whom the firm is being operated–ethical? Why or why not?
• Why might ethical companies benefit from a lower cost of capital than less ethical companies?
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