Explore BrainMass

Capital Budgeting

Vastine, Nova and Benson: Calculate book value, payback period, NPV, IRR

1. Vastine Medical, Inc. is considering replacing its existing computer system, which was purchased 2 years ago at a cost of $325,000. The system can be sold today for $200,000. It is being depreciated usinf MACRS and a 5-year recovery period (see Table 3.2, page 108). A new computer system will cost $500,000 to purchase and ins

Cost of Capital: The Marietta Corporation

The Marietta Corporation, a large manufacturer of mufflers, tailpipes, and shock absorbers, is currently carrying out its financial planning for next year. In about two weeks, at the next meeting of the firm's board of directors, Frank Bosworth, vice president of finance, is scheduled to present his recommendations for next year

Replacement Decisions - Tennergy Corporation

Tennergy Corp is considering an investment in a new machine with a price of $40 million to replace its existing machine. The current machine was purchased one year ago at $10 million and depreciated on a straight line basis to zero salvage value over five-year useful life. It currently has a market value of $8.5 million. The new

Calculate the Cost & Debt

2. Husky Enterprises recently sold an issue of 10-year maturity bonds. The bonds were sold at a deep discount price of $615 each. After flotation costs, Husky received $604.50 each. The bonds have a $1,000 maturity value and pay $50 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Husky's m

Finance Problems

I am attempting these problems and the book is confusing me and it only shows examples of how to calculate these using a financial calculator and I do not have one, is there another way to solving these that someone can show me. (NPV and shareholder wealth) Stockholders are surprised to learn that the firm has invested $43

Solve: Accounting Problems

.Please answer the following questions: 1. Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's net working capital? a. $25,000 b. $325,000 c. $770


Please see the attached file. Problem 11-8. NPVs, IRRs, and MIRRs for Independent Projects Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $19,000, and that for the pulley

Question about Finance problems: IRR and NPV.

Part 1. Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows: Year Cash flow 0 - $500,000 1 $100,000 2 $110,000 3 $550,000 If the discount rate is 0%, what is the project's net pr

Capital budgeting: Finance problem

The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine's base price is $108,000, and it would cost another $12,500 to modify it for special use. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The machine would require an increase in net wo

Question about Cost of Capital

SkyHigh Airlines has five possible investment projects for the coming year. Each project is indivisible. They are: Project A: $5 million investment / IRR: 22% Project B: $12 million investment / IRR: 16% Project C: $6 million investment / IRR: 18% Project D: $2 million investment / IRR: 14% Project E: $3 million investment

Corporate Finance - Effect of inflation on NPV and Working Capital

Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward? Explain how net operating working capital is recovered at the end of a project's life, and why it is included in a capital budget analysis. Define (a) simulation analysis, (b) scenario analy

Letter explaining whether company should acquire computer system: NPV, IRR

See the attached file. You have been asked to help a local company evaluate a major capital expenditure. The company is a new internet company and must buy a large computer system which will generate additional revenue. The company provides you with the following information: (Table includes all the necessary information i

Capital Budgeting for the Bingo Corporation

The Bingo Corporation is in the process of determining which of the following two projects that they may invest in. The details are provided in the attachment. a. What is the payback period? b. What is the net present value of the two projects? c. What is the Internal rate of return of the two projects? d. What

Dell Computer: Determine free cash flow, IRR, NPV of a project

Determine the cash flows associated with this project. The operating costs and net working capital requirements are similar to the rest of the company and that depreciation is straightline for capital budgeting purposes. Dell Computer is considering adding a new product line and needs to determine the net cash flows and NPV

4 Finance problems

IN CLASS PROBLEMS: Class let's see if we can also apply the concepts in Chapter 12 to the following problems. . 1) The capital budgeting director of Analytical Systems Inc. (ASI) is evaluating a new project that would decrease operating costs by $30,000 per year without affecting revenues. The project's cost is $50,000. The

Payback, Internal Rate of Return and Purchase Price

Automation of the shipping department at Computer Mart would save labor costs. Details about the automation equipment are as follows: Purchase price of automation equipment $1,200,000 Net annual cash savings provided by the new equipment $200,000 Estimated service life

Cash Flows, terminal cash flow, cash diagram, NPV, IRR

It's been two months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment und

Good Foods, Inc: Calculate payback period, NPV, IRR, PI, MIRR

USE THE FOLLOWING DATA FOR THE NEXT EIGHT PROBLEMS: . The director of capital budgeting for Good Foods, Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows: . ..............................Expected Net Cash Flows Year....................Project L..................Project

Flotation Cost and Retained Earnings

1.) Twister Corporation is expected to pay a dividend of $7 per share one year from now on its common stock, which has a current market price of $143. Twister's dividends are expected to grow at 13%. a) Calculate the cost of the company's retained earnings. Answer: 17.90% b) If the flotation cost per share of ne

Net Present Value & Rate of Return for a winning Powerball lottery ticket

Please see attached file for further detail. Question 2 - Net Present Value You have just paid $20 million in the secondary market for the winning Powerball lottery ticket. The prize is $2 million at the end of each year for the next 25 years. If your required rate of return is 8 percent, what is the net present value (N

Capital Budgeting: NPV calculations

Most firms generate cash inflows every day, not just once at the end of the year. In capital budgeting, should we recognize this fact by estimating daily project cash flows and then using them in the analysis? If we do not, are our results biased, and if so, would NPV be biased up or down? Explain.

Present Value

Suppose your bank account will be worth $7,000 in one year. The interest rate (discount rate) that the bank pays is 8%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 3%?