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Capital Budgeting

Nugget: Compute Net present value, IRR for alternatives. Which should they use?

A company (Nugget) has to choose between mutally exclusive innovations for improving its computer system one is offered by AMD and the other by NRC. The after tax cost of capital is 12 percent. AMD's system costs $1 million and promises after-tax cash flows in personnel cost saving for four years: $400,000 at the end of Year 1

Draft Project Proposal - Management Accounting and Finance Concepts

Project: The purpose of the project is to apply the concepts and techniques of the module to the analysis of real-world situations or problems. Students are expected to use diverse sources of information and to carry out an original analysis rather than summarize or rehash existing work. Students are encouraged to use situations

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

High-velocity environment managers worry about the present

Why would managers in high-velocity environments worry more about the present than the future? Would an individual manager working in this type of environment be more likely to succeed with a rational approach or an intuitive approach? Discuss

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 the investment

Davis Corporation is considering an investment that requires an initial outlay of $400,000 and will provide cash benefits of $100,000 at the end of each year over its 5-year life. In addition, the asset will have a salvage value of $200,000 at the end of its 5-year life. Compute the internal rate of return for the investment

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

Susie's Cakes by Design: Capital Budgeting evaluation

As financial manager for Susie's Cakes by Design, your next assignment is to evaluate the feasibility of investing $95,000 in a piece of equipment having a five-year life. In evaluating the proposed project, you have been able to estimate the cash inflows associated with the proposed project as follows: Year Amount 1

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

Internal Rate of Return (IRR): Undertaking an Investment

Billy and Mandy Jones have $25,000 to invest. On average, they do not make any investment that will not return at least 7.5% per year. They have been approached with an investment opportunity that requires $25,000 upfront and has a payout of $6,000 at the end of each of the next 5 years. Using the internal rate of return (IRR) m

NPV and IRR Calculations: Axel Corporation

Axel Corporation is planning to buy a new machine with the expectation that this investment should earn a rate of return of at least 15%. This machine, which costs $150,000, would yield an estimated net cash flow of $30,000 a year for 10 years. A. What is the net present value for this proposal? B. What is the internal rate

Capital Budgeting and Net Working Capital: NPV, IRR

See the attached file. A project requires an initial investment of $300,000 to purchase a processing equipment. This equipment will be depreciated on a straight line schedule over 5 years. The sales revenue is $400,000 each year for three years and the cost is $200,000 each year for three years. At the end of the third ye

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

Budgets for the Largest Department Payrolls

Review the basic structure of this budget. Locate a variety of items that appear in a budget. These items could include the previous yearâ??s budget, transmittal letter, various departmentâ??s and fundâ??s budgets broken down, staffing, and the GFOA award for excellence in financial reporting. What is the largest departm

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

Ohm Depot Co equipment purchase: PVB, NPV, Payback, Profitability index

The Ohm Depot Co. is currently considering the purchase of a new machine that would increase the speed of manufacturing electronic equipment and save money. The net cost of the new machine is $66,000. The annual cash flows have the following projections: Year Amount 1 $21,000 2 $29,000 3 $36,000 4 $16,000 5 $8,000 If t

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