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Capital Budgeting

Capital budgeting for new product: Compute standard and real options NPV

Your company wants to invest in a new product. The marketing department provided you with the following data: After-tax cash flows for new product Year 1 2 3 4 5 6 Low Demand 100 100 100 100 100 100 High Demand 300 500 600 700 700 600 All the cash flows will be received at the end of the year (Ignore taxes and depreci

Present Value Analysis - James Hardy

Hi, ** Please help with the attached problems. ** Thank you so much. James Hardy recently rejected a $14,000,000, five-year contract with the Vancouver Seals. The contract offer called for an immediate signing bonus of $4,000,000 and annual payments of $2,000,000. To sweeten the deal, the president of player

Expect annual after-tax case flow from equipment, IRR, NPV

Jared Corp. invests in a piece of equipment that cost $150,000, has a useful life of five years with no salvage value and will be depreciated using straight-line depreciation. The equipment will generate annual revenues of $60,000 and the company will incur annual cash Expenses of $24,000 in operating the equipment. Jared has a

Watson Leisure Time Sporting Goods: Calculate NPV, is new equipment feasible?

Watson Leisure Time Sporting Goods has improved operations over time and the company needs to make a decision related to an equipment decision. The company plans to purchase a new piece of equipment (to be used over a six year period) for $320,000. Assume the EBDT and depreciation (based upon the use of the 5-year MACRS

Net Present Value - most likely, pessimistic, optimistic rosy

Below is a earning's forecast for a "Most Likely" Scenario. Determine the Net Present Value for each of the following three scenarios. Most Likely Conditions as show below Pessimistic Sales are only 175,000 units annually, and Cost of Goods sold raises from 70% of Sales revenue to 75% for all years. Price drops t

LiveForever Biotechnology Corp: Net Present Value calculations

LiveForever Biotechnology Corporation (LFBC) has a new potential drug developed by their research group for which they are planning the marketing. The plan has three steps: 1) development (gaining approvals and designing processes and packaging), 2) marketing as a proprietary drug (no direct competitors) and 3) marketing as a g

NPV (Wolverine Corporation)

Hello, My problem is based on NPV. I am having trouble because I keep coming up with different answers. Will you please help me and show all work including explanations as to why you came to that conclusion? Thank you so much for your time! ***I am really confused and any help would be greatly appreciated!*** --------

Business: Capital Budgeting

The owner of a new startup company, GreatIdea LLC, needs a working capital analysis for the coming four quarters to assist with her cash flow concerns. Unlevered Net Income is expected to be zero for the first two quarters and $100,000 in quarter 3 and $300,000 in quarter 4. Accounts payable will be constant at $50,000 per qu

Net Present Value for Periodical Sales

National Book and Periodical Sales (NBPS) is considering a proposal to offer a proprietary electronic book reader. They have hired a company to develop and produce a product in 2010 at a cost of $1.5 million which will be depreciated straight line over 5 years. The reader would sell for $200 each which is the cost of producin

Logic of the business process of using Structured English

In a relatively small company that sells thin, electronic keypads and switches, the rules for selling products are such that sales representatives are assigned to unique regions of the country. Sales come either from cold calling, referrals, or current customers with new orders. A sizable portion of their business comes from ref

Present Structured English: Decision Table and Logic

An organization is in the process of upgrading microcomputer hardware and software for all employees. Hardware will be allocated to each employee in one of three packages. The first hardware package includes a standard microcomputer with a color monitor of moderated resolution and moderate storage capabilities. The second packag

Budgeting and Profit Planning

See attached. Wynn Corporation is approximating the following sales for the first six months of the next year: January.......................$212,000.00 February.....................$385,000.00 March..........................$275,000.00 April.............................$500,000.00 May..............................$325

Component Costs of Capital and the WACC

Star Products Company is a growing manufacturer of automobile accessories whose stock is actively traded on the over-the-counter (OTC) market. During 2009, the Dallas- based company experienced sharp increases in both sales and earnings. Because of this recent growth, Melissa Jen, the company's treasurer, wants to make sure that

Project Evaluation for Machine Purchase & Project Performance

1. Sanjay's Incorporated is analyzing two machines to determine which one it should purchase. The company requires a 14% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3-year life. Machine B costs $180,000, has annual operating co

Evaluating Projects using NPV, IRR & PI

Please see attached file. 1) The X Corp has identified the following two mutually exclusive projects. X Corp has a cost of capital of 10%. What is the NPV, IRR and PI of each project and which project should they accept and why? TIME PROJECT A PROJECT B 0 -10,000 -10,000 1 12,000 100 2 100 100 3 100 100 4 100 16,000

Principles of managerial finance - 50 multiple choice questions

Please complete the attached 50 multiple choice practice problems 1 Finance can be defined as A) The system of debits and credits. B) The science of the production, distribution, and consumption of wealth. C) The art and science of managing money. D) The art of merchandising products and services. Answer

Multiple Choice/ T-F

I need help with the answers. True/False . Please indicate if the statement is True or False in the space provided below. 1. The break-even model expresses the volume of output as a unit quantity. 2. According to the DuPont Analysis, an increase in net profit margin will decrease return on assets.

Investment decisions: Innovation Co, Elm Dale Enterprises, Markov Manufacturing

Please show all work. Excel can also be used. 1. Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5 million. The product is expected to generate profits of $1 million per year for ten years. The company will have to provide support expected to cost $1

Comparing Investment

3.Comparing Investment Criteria Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule. a. Payback period. b. Average accounting return. c. Internal rate of return. d. Profitability i

Capital Budgeting

Suppose Projects A and B have the Co and C1 after tax net cash flows shown below. The Net Present Value Profiles for Project's A and B will cross over one another at what approximate discount rate? Project Co C1 A -500 +700 B -1000 +1300 A) 0 % B) 10% C) 16.67% D) 20% E) 21.37% F) No cross

Capital Budgeting

If the NPV of a project with conventional cash flow is $500 and the required rate of return is 8%, the IRR must be: A) equal to $500 B) Less than 8% C) equal to 8% d) greater than 8% e) not enough information provided to accurately choose one of the answers above

Capital Budgeting

Which one of the following investment techniques may not use all possible cash flows in its calculations? A) NPV B) Payback Period C) IRR D) PI E) MIRR E) Two or more of the above may NOT include all possible cash flows in their calculations

Develop an integer programming model to maximize NPV for a real estate developer

Roblem 11-19: A real estate developer is considering three possible projects: a small apartment complex, a small shopping center, and a mini-warehouse. Each of these requires different funding over the next two years, and the net present value of the investments also varies. The following table provides the required investment

Financial Management

Today I need help with a 40 question multiple choice overview pre-test given by our tutor. I want to compare your results with my own and those of the tutor. Attached is a Word document with these questions and an Excel file where you put the letter answer (i.e., A, B, C, D or E). Please work the problems separately and place th

International Capital budgeting: AlliedSignal

With AlliedSignal's proposed automotive plant, suppose that the projected riskless interest rates (APR) in the US and Switzerland are as given here in the excel file. a) Calculate the spot exchange rates expected one, two, three, four, and five years hence. b) Calculate the projected incremental cash flow stream in dollars on

Determining Discount Rate, Return Probability and Expected Return

1. Largent Supplies Corp. has borrowed to invest in a project. The loan calls for a payment of $17,384 every month for three years. The lender quoted Largent a rate of 8.40 percent with monthly compounding. At what rate would you discount the payments to find amount borrowed by Largent? 2. The expected return for Stock Z is

Weighted Average Cost of Capital (WACC) for Evaluation

ExSalvo, a limited partnership (whose partners are individuals in the 39.6% income tax bracket) is considering salvaging a Spanish treasure ship sunken in the Caribbean Sea. The partnership previously spent $10,000 in 1998 locating the ship and planning its recovery. The deal requires ExSalvo to spend $50,000 now (on 1/1/99)