Part 1

Assume that for a car manufacturer, Chrysler Ford. Your boss, the chief financial officer, has just handed you

Don't use plagiarized sources. Get Your Custom Essay on
Get a PLAGIARISM-FREE custom essay written for you!
Order Essay

the estimated cash flows for two proposed projects. Project L involves adding a new item to the firm’s

ignition line; it would take some time to build up the market for this product, so the cash inflows would increase

over time. Project S involves an add-on to an existing line, and its cash flows would decrease over time. Both

projects have 3-year lives, because Chrysler is planning to introduce entirely new models after 3 years.

Here are the projects net cash flows (in thousands of dollars):

Expected after-tax


net cash flows (CFt)                                                                                               Project S

Year (t)      Project S       Project L                                                                       0         1         2          3

0                 ($100)            ($100)                                                                       -100     70       50        20

1                    70                    10

2                    50                    60                                                                          Project L

3                   20                     80                                                                            0         1         2         3

                                                                                                                            -100     10      60        80

Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows.

The CFO also made subjective risk assessments of each project, and he concluded that both projects have risk

characteristics which are similar to the firm’s average project. Chrysler’s weighted average cost of capital is 10%.

You must now determine whether one or both of the projects should be accepted.


Evaluate the projects using the 5 key techniques:

(1) payback period,

(2) discounted payback period,

(3) net present value,

(4) internal rate of return, and

(5) modified internal rate of return.

Identify those projects that will lead to the maximization of the firm’s stock price.


Part 2

Critically appraise the appraisal techniques above. Discuss their limitations, the social and

ethical factors that should also be considered when making such decisions.

Homework Paper
Calculate your paper price
Pages (550 words)
Approximate price: -

Our Advantages

Plagiarism Free Papers

All our papers are original and written from scratch. We will email you a plagiarism report alongside your completed paper once done.

Free Revisions

All papers are submitted ahead of time. We do this to allow you time to point out any area you would need revision on, and help you for free.

Free Title-page

A title page preceeds all your paper content. Here, you put all your personal information and this we give out for free.

Free Bibliography

Without a reference/bibliography page, any academic paper is incomplete and doesnt qualify for grading. We also offer this for free.

Originality & Security

At Homework Sharks, we take confidentiality seriously and all your personal information is stored safely and do not share it with third parties for any reasons whatsoever. Our work is original and we send plagiarism reports alongside every paper.

24/7 Customer Support

Our agents are online 24/7. Feel free to contact us through email or talk to our live agents.

Try it now!

Calculate the price of your order

We'll send you the first draft for approval by at
Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

We work around the clock to see best customer experience.


Flexible Pricing

Our prces are pocket friendly and you can do partial payments. When that is not enough, we have a free enquiry service.


Admission help & Client-Writer Contact

When you need to elaborate something further to your writer, we provide that button.


Paper Submission

We take deadlines seriously and our papers are submitted ahead of time. We are happy to assist you in case of any adjustments needed.


Customer Feedback

Your feedback, good or bad is of great concern to us and we take it very seriously. We are, therefore, constantly adjusting our policies to ensure best customer/writer experience.