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Capital Budgeting

Clark Paints Proposal

Clark Paints: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the paint cans instead of purchasing them. The equipment needed would cost $200,000, with a disposal value of $40,000, and it would be able to produce 5,500,000 cans ove

NPV and ANPV decisions

Richard and Linda Butler decide that it is time to purchase a high-definition (HD) television because the technology has improved and prices have fallen over the past 3 years. From their research, they narrow their choices to two sets, the Samsung 42-inches LCD with 1080p capability and the Sony 42-inches LCD with 1080p feature

Long-term investment decision, NPV method

Can you help me get started with this project? Jenny Jenks has researched the financial pros and cons of entering into an elite MBA program at her state university. The tuition and needed books for a master's program will have an upfront cost of $100,000. On average, a person with an MBA degree earns an extra $20,000 per year

Management accounting

1. Return on investment (ROI) can be increased by: a. increasing sales b. decreasing operating assets c. decreasing operating income d. decreasing asset turnover 2. Randall Company makes and distributes outdoor play equipment. Last year sales were $2,400,000, operating income was $600,000, and the assets used were

Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20 percent cost of capital. A summary of key data about the proposed projects follows.

Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20 percent cost of capital. A summary of key data about the proposed projects is attached. a. Use the NPV approach to s

Capital Budgeting Discounted Payback Periods

ASSIGNMENT 1 1. Case 1: Review the requirements of the Chapter 3 Mini-Case, parts b through j. Then apply those same requirements to do an analysis of Brinker International, which is a real company. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most recent years. Download 10K fina

EEG, Inc: NPV, Payback Period, and Internal Rate of Return

EEG, Inc (Entrepreneurial Entertainment Group) is a recording studio that was formed by five friends shortly after high school in 1996 in Biloxi, Mississippi. The five friends have always had a love of pop and hip-hop music and decided to become recorders/producers as they all had a flair for different elements of the business

25 accounting questions and problems

Question 25 Nike Inc. has a fiscal year end of May 31. On May 31, 2007, Nike Inc. reported $10,688.3 million in assets and $7,025.4 million in equity. During fiscal 2008, Nike's assets increased by $1,754.4 million while its equity increased by $799.9 million. What were Nike's total liabilities at May 31, 2007 and May 31, 200

30 multiple choice questions for financial accounting

1. A company has a current ratio of 1.8, a net income of 180,000, a profit margin of 10% and an accounts receivable balance of 150,000. What is the firm's average collection period? A. 24 days B. 30 days C. 43 days D. 50 days 2. Balance sheets Income statement Assets

Flow of Information in a Generic Capital Budgeting Process

Provide a memorandum detailing with the flow of information involved in a generic capital budgeting process. This will be used as a basis for developing a standard BPP approach.The memorandum should discuss the organizational cost of capital, how to integrate new project investment with an existing investment portfolio, and how

Project Summary, Abstract, Narrative and a Budget Justification

Summary of the following Topic: Project Summary/Abstract, Project Narrative and a Budget Justification into 2-3 paragraph Submit Grant Proposal, July 2011 Expected Grant Notification: October,2011 Get possession of land from Government January, 2012 Complete building the proposed building July,2012 Obtain computers,

FV of an annuity, PV of stream of cash flows, after tax cash flow, IRR, Bond YTM

See attached file for proper format. Question 1. Jay Coleman just graduated. He plans to work for five years and then leave for the Australian "Outback" country. He figures that he can save $3,500 a year for the first three years and $5,000 a year for the next two years. These savings will start one year from now. In addition

Manager's use of variance analyses; Pros and cons of flexible budgeting

1- "By the time an accountant has created all the variance analyses, a good manager should already know where the large favorable and unfavorable variances are and what caused them" Find support for and against this quote from articles and from your own experience and understanding. 2- What's the big deal with "Flexible Budge

NPV / IRR Questions

Bonita Corp. is thinking about opening a soccer camp in southern California. To start the camp, Bonita would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year the camp would be run for 8 sessions of 1 week each. The company would hire college soccer playe

Installing a New Machine

Sunshine Allday Company is investigating the viability of installing a new machine to expand their operations. The machine under consideration will require an initial outlay of $215,000. If purchased, the new machine will generate before-tax net cash inflows of $55,000 per annum. The term of the project is eight years. At the en

Capital budgeting for ABC Waste Disposal: New Incinerator

1. ABC Waste Disposal is looking at replacing the current incinerator with a new one. The current incinerator originally cost $500,000 four years ago. The original estimated useful life was 10 years. ABC was depreciating it using straight line depreciation with an assumption of no residual value. (While it would be fully depreci

Internal Rate of Return Decision Criterion

A company has estimated that a proposed $10,000 investment will generate $3,250 for each of the next four years. Their required rate of return is 9%. Using internal rate of return as a decision criterion, determine whether or not this proposal should be accepted.

Capital Budgeting Three-Part Process

Capital budgeting is a three-part process: data gathering, data analysis, and decisions. The techniques, such as NPV and IRR, are an aspect of data analysis. The mathematical analysis is not the real challenge since you can use always a financial calculator or financial software application. The hard part is gathering data th

List and describe the four main investment appraisal methods

List and describe the four main investment appraisal methods. Which one is the best method to evaluate a risky investment and why? (Chapter 10) Reference: Atrill, P. & McLaney, E. (2008). Accounting and Finance for Non-Specialists. 6th ed. Harlow, England: FT Prentice Hall Please include other references.

Construct the annual cash flows and calculate the NPV and PI

11.21 *Expenses -% of Sales Year Units Sold Selling price COGS Marketing Admin Expenses 1 125 $80.00 70.00% 24.00% $180.00 2 250 82 68.00% 22.00% 150 3 300 85 68.00% 20.00% 150 4 250 80 66.00% 15.00% 150 *all expenses exclude depreciation Working Captial: $600 initially Year (0)


Looking for examples and explanations of common financial formulas like - time value of money -future value annuity -present value of annuity -IRR


Differentiate between the equation used to solve for NPV and the one used to solve for IRR? Which method is better or worst and why? Why is risk analysis so essential to capital budgeting decisions?

Capital Budgeting Decisions: Net Present Value, IRR

South American Mining Suppose that a mining operation has spent $8 million developing an ore deposit in South America. Current expectations are that the deposit will require 2 years of development and will result in a realizable cash flow of $10 million at that time. The company engineer has discovered a new way of extracting t

Calculate NPV, IRR for project; evaluate a capital budgeting

1. Given the following information, calculate the NPV and IRR and give your recommendation on the project (accept/reject). - Cost of automation system (invoice): $750,000 - Transportation and installation: $150,000 - Training: $100,000 - Firm's WACC: 10% - Firm's tax rate: 40% - Capital gains tax: 2

Cost of Capital Measured

Which is correct? The cost of equity is generally harder to measure than the cost of debt because there is not stated, contractual cost number on which to base the cost of equity. The cost of capital used to evaluate a project should be the cost of the specific type of financing used to fund that project, i.e., it is the a

Total Risk, Non-Diversifiable Risk and Diversifiable Risk

Questions: # 1: How are the total risk, non-diversifiable risk, and diversifiable risk related? Why is non-diversifiable risk regarded as the only relevant risk? Do you agree this is correct? ******************************************************************************************* Questions: # 2: What is the difference