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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
1. True or false? Explain briefly.
a. Book profitability measures are biased measures of true profitability for individual assets. However, these biases “wash out” when firms hold a balanced mix of old and new assets.
b. Systematic biases in book profitability would be avoided if companies used depreciation schedules that matched expected economic depreciation. However, few, if any, firms have done this.
2. Consider the following project:
Period |
||||
0 |
1 |
2 |
3 |
|
Net cash flow |
-100 |
0 |
78.55 |
78.55 |
The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year
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