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Capital Budgeting

Deer Valley Lodge-Make or buy analysis

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the

PQR Company is considering an investment in a piece of equipment that costs $25,000, has a useful life of four years, and generates annual savings net of taxes (i.e., ignore taxes for this problem) of $10,000 per year. Management uses a 14% discount rate for its minimum. 1. What is the NPV? 2. What is the Payback Period? 3. W

Finance Questions

Hello, Attached you will find two finance problems. Please show all the formulas and steps for both of the problems so that they can be understood completely. Thank you Finance Questions 1. Calculate the internal rate of return on the following projects. Make sure to include all calculator key strokes or show Excel wor

Practice Problems

I am looking for a detailed explanation of the problems and the work detailed so as to help me to achieve better understanding of the material. 1. You invest a single amount of $10,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have afte

Red Flags

One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant increase in accounts receivable without commensurate growth in sales (that is, accounts receivable turnover decreases). can you list and discuss at least five other red flags the astute analyst might look for, expla


1. An increase in the discount rate: A) will increase the present value of future cash flows. B) will have no effect on net present value. C) will reduce the present value of future cash flows. D) is one method of compensating for reduced risk. 2. Suppose an investment has cash inflows of R dollars at the end of

Capital Budgeting: Investing in New Equipment and Work Space

1. Prince Company's required rate of return is 10%. The company is considering the purchase of three machines, as indicated below. Consider each machine independently. For this question, ignore income taxes. (a) Machine A will cost $25,00 and have a life of 15 years. Its salvage value will be $1,000, and cost savings are p

Capital budgeting proposals (annual cash inflows and net present value)

Chose the correct answer A corporation is assessing the risk of two capital budgeting proposals. The financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows which are given in the following table. The firm's cost of capital is 10 percent. Project A Initial Investme

1000 words

Write a memo to the general manager explaining your analysis for the specialty spark plug project. Include the following information: Present the NPV and IRR calculated for the purchase of new equipment (Phase 3 task 1). Explain the effect of a sales volume increase on the total fixed costs, unit fixed costs, total vari

Simple Rate of Return

Chateau is winery in France, which is headed by Gerald Despinoy. Doing the fall season, is the busiest part of the year, and partime workers are hired to pick and process grapes. Gerald is currently looking for a harvesting machine to reduce the labor needed for picking. Addl info :( = represent French currency euro The w

Perference Ranking of Projects

Dimple Company has limited funds available for investments and must ration the funds among four competing projects. Selected information on the four projects follows: Project Investment Net Present Life of the Internal Rate Required Value Project (yrs) of Return A $800,000 $221,615 7 18% B $675,000 $210,000 12

Net Present Value Analysis

Rob plans to retire in 6 years and want to open some type of small business operation that can be managed within his free time away from his regular occupation. He's thinking about opening a Laundromat, he has determined the following: 1. Washers, dryers, and other equipment needed to open cost $194,000 2. 6,000 in working ca

Metro Car Washes: Reviewing an Investment Proposal

Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year is presented in the following schedule. The salvage value of the investment at the end of e

Making capital investment decisions

The accountant of your business has recently been taken ill through overwork. In his absence his assistant has prepared some calculations of the profitability of a project, which are to be discussed soon at the board meeting of your business. His workings, which are set out below, include some errors of principle. You can assume

Integrative Problem Chapter 22 Questions and Chapter 21 problem #3

Integrative Problem Chapter 22 Questions 1. You purchase machinery for $23,958 that generates cash flow of $6,000 for five years. What is the internal rate of return on the investment? 2. The cost of capital for a firm is 10 percent. The firm has two possible investments with the following cash inflows: ____________________

Accounting Risk in Capital Budgeting

1. Which of the following is NOT an acceptable method of accounting for risk in capital budgeting? A) Certainty equivalent approach B) Beta distribution analysis C) Probability trees D) Scenario analysis 2. Famous Danish Corp. is replacing an old cookie cutter with a new one. The cookie cutter is being sold for $25,000

Analyzing cash flows of project

Semi-con is considering a new investment proposal that involves manufacturing and selling a new semiconductor chip . They have identified a operational manufacturing plant that is available for lease, and eleven key sales districts. They have assembled the following information: ?Revenues are expected to be $1,500,000, $1,250

25 multiple choice

See attached. 1. is a cost that requires a cash disbursement. 2. The salary forgone by a person who quits a job to start a business is an example of a(n) 3. Bull Company manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Heat Corporation has offered to sell

Financial overview for global venture

I need to do the following for a global venture of Solar energy in the country of Sudan. The financial is total fiction, but I am having trouble of where to start with that and the sources of financing. This is for a powerpoint presentation not a paper. I just can't seem to get started and some help would be great. Prepar

Discuss and describe the role of a financial manager

Please provide answers to answer the following ten questions. In the case where you are asked to discuss and describe an answer please provide the answer to the questions and then provide an example. In all other questions be sure to explain your answer. 1. Discuss and describe the role of a financial manager? What is the dif

A) What is the net present value of this project? B) How many shares of common stock must be issued, and at what price, to raise the required capital? C) What is the effect, if any, of this new project on the value of the stock of the existing shareholders?

Question: You are the CEO of Value-Added industries, Inc (VAI). Your firm has 10,000 shares of common stock outstanding, and the current price of the stock is $100 per share. There is no debt; thus, the "market value" balance sheet of VAI appears as follows: VAI market Value Balance Sheet ASSETS 1,

Online professor's response to: NPV and IRR

Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $18,250, and the project is expected to yield after-tax cash inflows of $4,000 per year for 7 years. The has a 10% cost of capital. a) Determine the net present value (NPV) for the project b) Determine the i

Constant Risk Rate: Calculating the Present Value

Question: Next year you will begin receiving $155 dollars per year in perpetuity from your grandparent's family trust fund (first payment is exactly 1 year from today). You consider these payments essentially risk free and have decided to discount them at a constant risk free rate of 6.5%. What is the present value today of thes

Higher IRR and NPV

You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10 million. Investment A will generate $2 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.5 million at the end of the first year and its revenues will grow

Time Value of Money and Capital Budgeting

Problem: If you invest $8000 per period for the following number of periods, how much would you have? a.7 years at 9 percent b.40 years at 11 percent Problem: The western sweeptakes has just informed you that you have won $1 million. The amount is to be paid at the rate of $50000 a year for the next 20 years. With a discoun

Capital Budgeting: Calculate which Franchise to buy using IRR, MIRR, NPV

You have just graduated from the MBA program of a large university, and one of your favorite courses was "Today's Entrepreneurs." In fact you enjoyed it so much you have decided you want to "be your own boss". While you were in the master's program, your grandfather died and left you $1 million to do with as you please. You are