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# Capital Budgeting

### 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

### Capital Budgeting Practice Problems

I need help with the problem down below. Thanks in advance. *********************** Part 1. Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows: Year Cash flow 0 - \$400,000 1 \$100,000 2

### Combined Present Value

Determine the combined present value as of December 31, 2011, of the following four payments to be received at the end of each of the designated years, assuming an annual interest rate of 8%. Payment Year received \$5,000 2012 6,000 2013 8,000 2015 9,000

### 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

### Dobb's Corporation new delivery truck: Net Present Value, payback criteria

Dobb's Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck ( not the least of which is that it runs). The new truck would cost \$56,000. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to gene

### Present Value of Growth Opportunity

Cisco will pay a dividend of \$5 per share next year, and the dividends pay out ratio is 50%. Dividends are expected to grow at a constant rate of 8% forever and the required rate of return on the stock is 13%. Calculate the present value of the growth opportunity. a. \$100 b. \$76.92 c. \$23.08 d. None of the above

### Present and future value of irregular cash flow stream

Please see attached file for proper format. Present and Future Value Now consider an irregular cash flow stream (where CFs can take on any value). a. Calculate the Present Value of the Uneven Cash Flows. Interest Rate = 10% T=0 T=1 T=2 T=3 T=4 T=5 \$0 \$100 \$300 \$300 \$300 \$500 b. Calculate the Future Value

### 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

### Compute the NPV, IRR, and payback period for the following investment

1) Investment criteria) Compute the NPV, IRR, and payback period for the following investment. The cost of capital is 10%. Year 0 1 2 3 Cash flow - 200,000 100,000 100,000 150,000 2) (Cash flo

### 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

### Time value of money (TVM) is a very important concept. Why is it important for those participating in the capital budgeting process?

Time value of money (TVM) is a very important concept. Why is it important for those participating in the capital budgeting process?

### 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

### Systems Operations Management for Taylor Inc Manufacturing Widgets

1. Widget Production Evaluate a company that has personal issues that must be resolved. Read the following scenario to evaluate Taylor Inc. operations-management processes to help them maximize labor productivity. Management for Taylor Inc. would also like you to suggest alternative management techniques to improve productiv

### Healthcare budgets

What are the roles played by a budget and how many budget types are available? Under what conditions is a flexible budget likely to be more effective than a forecast budget?

### 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.

### Internal Rate of Return Example

The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing \$450,000. The Sisyphean Company expects cash inflows from this project as detailed below: Year One Year Two Year Three Year Four \$200,000 \$225,000 \$275,000 \$200,000 The appro

### Calculating the Internal Rate of Return

You are a boss of a restaurant considering the purchase of a self-ordering machine. The upfront cost is estimated to be \$23,828. The machine will increase revenues by \$10,000 per year and incur a maintenance cost of \$4,000 every year. The machine has a 5-year useful life after which can be sold for \$2,000. The project has a

### Accounting: ROCE vs ARR.

ARR (Accounting rate of return) and ROCE (Return On Capital Employed) both look at profit and compare it to the cost of the assets used to generate the profit. However, they differ in one important way. What is this difference and what are the two used to measure?

### 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

### Official Communications, Modalities and Decision Making: Control Systems for Andrew; Capital Budgeting for Brenda.

For this problem imagine you are an accountant and come into work to find several urgent emails waiting for you to respond. The first email is from Andrew, the president of a new division that has been started in the south-east to manufacture customized electrical components. After the first two months he feels that his sales

### 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.

### Calculate IRR for investment in ten year, zero coupone bond

A ten-year, zero-coupon bond with a yield to maturity of 6% has a face value of \$1000. An investor purchases the bond when it is initially traded, and then sells it four years later. What is the internal rate of return (IRR) of this investment, assuming the yield to maturity does not change? a. 7.65 % b. 6.00% c. 0.26%

### Use the incremental IRR rule to make the correct decision.

You work for an outdoor play structure manufacturing company and are trying to decide between two projects: Year End Cash Flows ( \$thousands) Project 0 1 2 IRR _______________________________ Playhouse -30 15 20 10.4% Fort

### Budgeting

Dream Inc. is considering two projects with the following after-tax cash flows Expected net cash flows Time Project A Project B 0 (\$30) (\$30) 1 \$5 \$20 2 \$10 \$10 3 \$15 \$8 4 \$20 \$6 Either venture would be funded with 40% equity and 60% debt. The cost of debt is 8%. The company has a beta of 1.5, the risk-free r

### 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)

### IRR - Internal Rate of Return Step by Step Solution

You have an investment opportunity that requires an initial investment of \$7,500 today and will pay \$11,000 in one year. What is the IRR of this opportunity? Must be shown as a percentage. Thanks!