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Capital Budgeting

Cannondale: Calculate the net present value of product modification.

Cannondale is considering a modification to one of their products. The change will have an immediate cost to Cannondale of $50,000, but is expected to raise revenues by $40,000 next year and $45,000 the year after that. The increase in manufacturing costs due to this change are expected be $5,000 per year. These numbers are

Finance and Budgeting In Education: Virginia Tech Polytechnic Univ

1. Use the Internet to research the current state of the economy and how it is affecting higher education institutions. What evidence can you find that colleges and universities are addressing financial problems through the process of retrenchment? Provide your sources of information. Use examples from your own experience if

CFO at a local hospital - payback, NPV, and IRR

Assume you are the CFO at a local hospital. The CEO has asked you to analyze two proposed capital investments - Project X and Project Y. Each requires a net investment outlay of $10,000 and the opportunity cost of capital for each project is 12%. The projects' expected net cash flows are as follows: Year Pro

Criminal Justice Integration Project and Presentation

Criminal Justice Integration Project and Presentation Identify, describe, and explain the following issues: - Budgets: projected revenue sources and expenditures Include an integration plan to improve interactions between law enforcement, private security, the courts, and institutional and community corrections over t

Finance: Define IRR, payback method, ROI with 6.0% WACC

1. What is meant by a company's "internal rate of return" and why is it important to use as a metric? What do some of the websites ( i.e. Zenwealth, Investopedia and Wikipedia) say about IRR? 2. What are the strengths and weaknesses of the payback method of ranking project proposals as compared to other methods? What method

Most Desirable and Least Desirable Project

Chris's Custom Manufacturing Company is considering three new projects, each requiring an equipment investment of $24,380. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $9,072 $11,816 $14,672 2 11,648 11,816 11,312 3 16,912 11,816 12,432 Total $37,

Capital Budgeting Process: allocation of value, key factors, financial return

1. Discuss how an organization would determine the total value to be allocated towards capital projects. 2. Discuss the key factors that would determine if a project should be approved in a capital budgeting process. 3. After a capital project has been approved and completed, discuss how you would assess whether or not t

Capital Budgeting of a New Product.

Your company has spent $200,000 on research to develop a new product. The firm is planning to spend $300,000 on a machine to produce the product. Shipping and installation costs of the machine will be capitalized and depreciated; they total $25,000. The machine has an expected life of 3 years, a $50,000 estimated resale value, a

Capital Budgeting for Fly by Night Airlines

13-14. The president of Fly-by-Night Airlines has asked you to evaluate the proposed acquisition of a new jet. The jet's price is $40 million, and it is classified in the 10 years MACRS class. The purchase of the jet would require an increase in net working capital of $200.000. The jet would increase the firm's before-tax revenu

Basic Capital Budgeting

1) Which are the following are correct: --one drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback. --one drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period. -

Capital Budgeting

Which are the following are valid conclusions of capital budgeting? one of more can apply. 1) Managers have been slow to adopt the IRR because percentage returns are a harder concept to them to grasp? 2)The discounted payback period improves on the regular payback period by accounting for the time value of money. 3) For

Capital Budgeting: Net Present Value Calculation

An investment will pay $700 at the end of each of the next 4 years, $600 at the end of Year 5, and $500 at the end of Year 6. What is its present value if other investments of equal risk earn 10 percent annually? a. $1,016.05 b. $2,201.45 c. $1,132.90 d. $3,545.45 e. $2,873.70

cost of stock/DCF

1) xyz stock currently trades at $45.50 per share. At the end of year, xyz is expected to pay annual dividend of $3.65 per share and the firm's dividend is expected to grow at a constant rate of 4% per year. What is the firm's cost of retained earnings? 2)If xyz were to issue new common stock, the new shares could be sold at

Calculate NPV and PI for the given proposal.

The Philadelphia Phillies are interested in building a new stadium. The most cost-effective method of building the stadium is to fund it through ticket sales. To go ahead with this development, the Phillies must spend $ 100,000 for a land survey, $ 100,000 for building permits and $ 10,000,000 for its installation. The stadiu

Return on Equity

You know that when expanding and investing in projects overseas as Acme plans to, it is essential to understand such things as return on equity (ROE) and internal rate of return (IRR). Using Internet sources (you may want to start with the websites listed below) gather information on ROE and IRR. Post a two to three paragraph ex

Equivalent Annual Annuity

Please review attachment Your firm has the opportunity to choose between the following two mutually exclusive projects: Expected Net Cash Flows Year Project S Project L 0 -500,000 -575,000 1 295,000 183,500 2 295,000 183,500 3 183,500 4 183,500 The projects provide a necessary service, so whichever project is

Determining the Best Mutually Exclusive Project

Given the cash flows for projects S and L, which are MUTUALLY EXCLUSIVE projects, compute the capital budgeting metrics and based on your computations then recommend the best project. Cost of capital for both projects is 10%. Project S Project L 0 -$2,000 -$1,650 1 $1,700 $600 2 -$400 $900 3 $600 -$175 4 $450 $800

Calculate the internal rate of return of the investment opportunity.

Joel Hodge, CFO of Kleiser Enterprises, is evaluating an opportunity to invest in additional manufacturing equipment that will enable the company to increase its net cash inflows by $600,000 per year. The equipment costs $1,794,367.20. It is expected to have a five-year useful life and a zero salvage value. Kleiser's cost of cap

Capital Budgeting Project for ChangePoint Proposal to SightScan

Please see attached file for more data and provide your explanation in the Excel file. The benefits of the ERP project begin when the system is put into operation. After the initial investment, the following benefits are expected over a 5 year period: reduced inventory costs ($105,000), and reduced administrative costs ($9

NPV and IRR for two mutually exclusive projects

Calculate the NPV and IRR for these two mutually exclusive projects. For both projects the required rate of return is 10%. Which project would you select and why? Provide sufficient detail to demonstrate your savvy financial skills. Year 0 1 2 3 4 NPV IRR (%) Project A -100 50 50 50 50 Project B -400 170 170 170 170

NPV IRR Calculations

Please view attachment for question. a. Calculate the NPV, IRR, Profitability Index, and MIRR for this project with a cost of capital of 12%. (see attached) b.For a single conventional project, the NPV and IRR will agree on whether to invest or to not invest. However, in the case of two mutually exclusive projects, th

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