Q1 (a) Critically explain how NPV, IRR and Payback can be used to appraise investments.
(b) Contrast the merits of these approach when capital is:
(i) Not rationed.
(ii) rationed.
Q2 (a) Describe how, in principles, the value of a firm might change as its leverage increases.
(b) Discuss why, in practice, firms might choose high levels of debt.
(c) Briefly explain how your answers to a and b might observed differences in debt ratios.