ANSWER PROVIDED QUESTIONS

Question 1-What is normally used as the discount rate under the net present value method? Why? What impacts the value of a corporation’s discount rate? Can a firm take measures to change its discount rate?

Question 2-Why does capital budgeting rely for analysis on cash flows rather than net income effects? What cash flows are important in capital budgeting decisions? Which cash flows should be included in the capital budgeting process and which should not be included?

Question 3-Explain the relationship between a company’s growth possibilities and its dividend policy. Can a company impact its growth with its dividend policy? How?

Question 4 – Discuss the major factors that may influence a firm’s willingness and ability to pay dividends. Why might one firm choose to pay dividends and another firm choose not to?