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Capital Budgeting

Cost of Capital and Capital budgeting for HBM, Inc.

1. HBM, Inc. has the following capital structure: Assets $400,000 Debt $140,000 Preferred Stock 20,000 Common Stock 240,000 The common stock is currently selling for $15 a share, pays a cash dividen of $075 per share, and is growing annually at 6 percent. The preferred stock pays a $9 cash dividen

Financial Management Questions: True false, multiple choice, problems

Please see the attached file. True or False 1) If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation. 2) The firm's financial risk may have both market risk and diversifiable risk components.

Corporate Finance

Capital Budgeting Question Attached. 1. Vextron Inc in Canada is planning on manufacture engine blocks for new vehicles. They expect to sell 250 blocks annually for the next 5 years. The foundry and machining equipment will cost a total of $800,000 and belongs in a 30% CCA (Capital Cost Allowance) class for tax purposes.

Greenpower Energy Cost of Capital: IRR, NPV

Greenpower Energy is considering two mutually exclusive projects. Both projects require an initial investment of $10,000. Project S is expected to produce cash flows of $1000, $2000, $6000, and $7000 in year 1, year 2, year 3, and year 4 respectively. Project Q is expected to produce cash flows of $6000, $5000, $2000, and $1000


Family budgets are very important in our daily lives. It is imperative to keep track of expenses to ensure the ability to pay bills on time and to be able to make various purchases. In this assignment you have an opportunity to use an Excel worksheet to create a fictional budget that not only pays for necessities but also ens

Sales Budget

Sales budget Colt Industries had sales in 2008 of $6,976,000 and gross profit of $1,199,000. Management is considering two alternative budget plans to increase its gross profit in 2009. Plan A would increase the selling price per unit from $8.72 to $9.16. Sales volume would decrease by 5% from its 2008 level. Plan B wo

Internal rate of return for a project

Please provide the solution to the following problem in an Excel spreadsheet. Turnbull Corp. is in the process of constructing a new plant at a cost of $30 million. It expects the project to generate cash flows of zero in the first year and $1,000,000, $3,000,000, $8,000,000, $18,000,000 and $20,000,000 over years two, three

Superior Manufacturers is considering...

Superior Manufacturers is considering a 3-year project with an initial cost of $846,000. The project will not directly produce any sales but will reduce operating costs by $295,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be

Finance: Price of stock, required rate of return, dividend growth, NPV, IRR, MIRR

1 . John and Larry's, Inc. does not pay dividends at this time. You overhear the CFO tell the CEO that the plan is to begin paying dividends in 4 years. The first dividend will be $2.00 and the dividends are expected to grow at a 5% rate thereafter. Given required rate of return of 15.5%, what should be the price of the stock t

Calculate NPV, IRR, maximum cost of capital for 2 problems

See attached file. Problem 1 For each of the projects shown in the following table, calculate the internal rate of return (IRR). Then indicate, for each project, the maximum cost of capital that the firm could have and still find the IRR acceptable. Project A Projec

Management Accounting: Mustra and Wilson, Limited

Question 1 For the past ten years Sam Ferny has been the general manager of Mustra, a division of Gemini Ltd which operates in Malaysia. Mustra manufactures computer circuit boards. Their strategy has been to achieve market share through flexible, Just-In-Time (JIT) production. Inventories are kept to a minimum and they mainta

Capital Budgeting: Explain preferred use of NPV over accounting rate of return

You are preparing a capital budget for your organization. One of the senior managers looks at your initial budget and says that it would be a lot easier to evaluate if you just use the accounting rate of return, rather than your current method of Net Present Value (NPV). Explain why you would prefer NPV to the accounting rate of

Budgeting for Frames R Us

Frames R Us manufactures picture frames for various retail outlets. Budgeted sales and production information for the next quarter is presented in the table. September October November December Units Sales 8,500 11

Budgeting Problem: Example

You have been asked to find the number of kilograms that will have to be purchased in the last quarter of this year (October, November and December). The following budget information has been provided: October November December January February Sales in unit

Making Capital Investment Decisions: Korry Materials

Can you help me get started with this assignment? You must analyze a potential new product -- a caulking compound that Korry Materials' R&D people developed for use in the residential construction industry. Korry's marketing manager thinks they can sell 115,000 tubes per year at a price of $3.25 each for 3 years, after which

Important information about Capital budgeting proposals

The CEO has given you 3 different large projects he's evaluating to see which might be most beneficial to the company to invest in. These include: A new labor-saving piece of equipment that cost $400,000 and will reduce labor and quality costs by $75,000/year for 6 years. A new marketing program, costing $500,000 is expected

Questions on the case of The Lazy Mower: Is It Really Worth It?

Refer to the file attached for the second case of "The Lazy Mower". 1. Prepare the performa statement showing the annual cash flows resulting from the Lazy Mower project? 2. How should the interest expenses of $400,000 be treated? Explain 3. Calculate the operating leverage entailed by this project. What does it indicat

NPV versus IRR: Cost-plus pricing vs. target costing

Explain cost-plus pricing and give an example that shows how prices would be determined using this method. How does it differ from target costing Suppose a company has 5 different capital budgeting projects from which to choose, but has constrained funds and cannot implement all of the projects. Explain why comparing the proj

Capital Budgeting Technique Effects: NPV, IRR, & Simple Payback

Summarize the resulting NPV explaining the effects of cost of capital and a very complete analysis of the 3 capital budgeting techniques of NPV, IRR, and simple payback. How and why are these techniques used in strategic financial management? Info: Given the information for Proposal A, which is the building of a new factor

Finance: WACC, Payback, NPV, IRR, net income, net cash flow

Chapter 8 Problems A 1 (Calculating the WACC) The required return on debt is 8%, the required return on equity is 14%, and the marginal tax rate is 40%. If the firm is financed 70% equity and 30% debt, what is the weighted average cost of capital? A 4 (Estimating the WACC with three sources of capital) Eschevarria R

Net Present Value of Investment in Machine

Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $6,000 annually and increase earnings before depreciation and taxes by $6,000 annually. Stanton will use the MACRS method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for $10

Finance: Net present value,payback and IRR

400 - 600 words; 1+ page of calculations and 100 - 150 words Details: The CEO has given you 3 different large projects he's evaluating to see which might be most beneficial to the company to invest in. 1). A new labor-saving piece of equipment that cost $200,000 and will reduce labor and quality costs by $40,000/year for

I am needing help understanding this problem

I get confused on what I am needing to do on problems like this. 10-12A. (Comprehensive problem) Traid Winds Corporation, a firm in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital, is considering a new project. This project involves the introduction of a new product. This proje