Spring Term 2021 FNCE623 Quiz 2 Instructor: Raymond Chen Student Number: Question: You are a CFO in a mid-sized company engaged in the manufacturing food equipment industry, which product life cycle...

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· Net Present Value (NPV) can be defined as the difference between the present value of the cash inflows and the present value of the cash outflows computed over the period of the investment. The concept of Net Present Value is used in capital budgeting to analyze whether the available investment or the project will be profitable for the company and the company should invest in the investment or not.
· Net Present Value uses the concept of the time value of money to compute the present value of the cash inflows and the cash outflows. Net Present Value relies on discount rate that is computed from the cost of capital of the company evaluating the investment opportunity. The discount rate is used to compute the present value due to the concept of inflation. Due to inflation the value of money today will decrease in the future.
· Since in the food equipment industry the product cycle is 3-5 years, hence the cash flows are also incurring over the period of 3...