PROFFESOR
b. According to calculations of Net Present Value the Project Alpha has a better value for the company, than the project Beta.
d. With the calculation of Internal Rate of Return, the better project is the project Alpha.
g. The Net Present Value represents the best tool to calculate the return on an investment or effectiveness of a project; the Net Present Value considers all the cash flows of the project and the economic conditions of the environment where the project will be developed (Boyte-White, 2015). The use of the Weighted Average Cost of Capital represents the internal conditions of the company; those are, the proportion of debt and equity; and the external conditions of the company, those are, the market risk, free risk, and premium risk. The calculation of the Net Present Value for a specific project in an industry sector or economic region will have different results according to the different values of WACC. With the Internal Rate of Return, there is no consideration of the market and economic sector considerations.
h. The recipe for the solution of global financial crisis solution is to avoid the creation of nominal value of assets nominated in currency (dollar, euro, yen, etc.) without the support of a physical trustable asset or collateral. The creation of money and quantitative easing procedures by the most important banks of the world –Federal Reserve, European Bank and Bank of Japan- introduce to the market trillion of equivalent dollars to the economy without the support of any trustable asset or value as gold, oil or land. The use of a monetary system based on trustable assets as gold, silver, oil or other assets will maintain the value of the money in hands of the people and out of control of the banks.
Bibliography
Boyte-White, C., 2015. What is the formula for calculating net present value (NPV) in Excel? [Online] Available at: http://www.investopedia.com/ask/answers/021115/what-formula-calculating-net-present-value-npv-excel.asp [Accessed 2016].
