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Capital Budgeting

Comparison of capital budgeting techniques

The department is considering the purchase of a new, more efficient pool heater for its swimming pool at a cost of $15000. It should save $3000 in cash operating costs per year. The estimated useful life is 8 years and zero disposal value. Ignore taxes. 1. What is the payback time? 2. Compute the NPV if the minimum rate of ret

WACC: Tesar Chemicals, Malholtra Inc

1. Tesar Chemicals is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates the NPV. If the decision is made by choosing the project with the higher IRR rather t

Decentralized Budgeting and Capital Budgeting

Please help with with the questions below: Define decentralized budgeting. Discuss what benefits could be realized by implementing decentralized budgeting and defend with examples. List two critical requirements for accurate capital budgeting estimation. Also, give an example of applying one capital budgeting tool.

Longer-Run Decisions: Capital Budgeting

I need help for the question below: A company owned a plot of land that appeared in its fixed assets at its acquisition cost in 1910, which was $10,000. The land was not used. In 2009, the local boys club asked the company to donate the land as the site for a new recreation building. The donation would be a tax deduction of


A shellfish processing company is thinking about purchasing a new clam digger for $14,000. The expected net cash flows resulting from the digger are $9,000 in year 1, $7,000 in the 2nd year, $5,000 in the 3rd year, and $3,000 in the 4th year. Should the company purchase this digger if its cost of capital is 12 percent? In provi

Calculate the NPV, IRR, Profitability Index, Payback Period

New equipment would permit the manufacture of 100,000 additional spark plugs every year. It will have a useful life of 5 years with no salvage value. The equipment will be depreciated using straight-line method. The plugs sell for $20 and cost $8 to manufacture using the new equipment. Indirect costs are remain the same. The eq

River County capital acquisitions

Analyze the following scenario: River County is planning several capital acquisitions for the coming year. These include the purchase of two new garbage trucks at $150,000 each, one new bulldozer at $240,000, three new riding lawn mowers at $16,000 each, and construction of an activity center in the park for $650,000. The expec

Cash Flow Scenarios

Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. Over lunch, you and Mary meet to discuss next steps with the expansion project. "Do we have everything we need on sales and costs?" you ask. "It must be time to compute the net pres

Operation budget

You will take on the role of a budget analyst for a local government agency. The first role of the budget analyst is to become familiar with the agency, the budget, programs, and capital projects. Select any local (city) government (e.g., Oklahoma City). To locate your agency's budget, you can either conduct a Google search on t

Multiple income statement questions

1. When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization: A. all expenses should be allocated to the segments. B. common fixed expenses should be allocated to the segments. C. only direct revenues and direct expenses shoul

Fixed Operating Costs, Cost of Purchase and Net Present Value

POSTED PROBLEMS: Problem 3 Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. The fixed operating costs of the company are $5,000 per month. The controlling shareholder interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot d

Hillyard Company: Solution of Master Budget Problem

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: 1 As of December 31, (the end of the prior quarter), the company's general ledger showed the following acco

Public Administration: Line Items

-Provide an example of an organization that uses line items, and describe the organization. -Why do line items appeal to you? Explain in detail. -In your opinion, what strengths and weaknesses do line items contain? Explain in detail.

The Importance of Capital Budgeting and Related Methods

Why is capital budgeting important, specifically in terms of increasing shareholder wealth? - Describe an example where pursuing an investment that has not passed normal capital budgeting go/no go criteria, may hurt the firms value. - Explain the pros and cons of the simple payback method, the net present value method and IRR

Education Investment Analysis

A Masters of Accountancy degree at CU cost $10,000 for an additional fifth year of education beyond the bachelors degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the unde

Determining a Firm's Annual Profit or Loss

A firm has the capacity to produce 1,000,000 units of a product each year. At present, it is operating at 70 percent of capacity. The firm's annual revenue is $700,000. Annual fixed costs are $300,000, and the variable costs are $0.50 per unit. The following equations will be useful. Profit = Revenue - Costs Revenue = Pric

Limits of Not-For-Profit Organizations

To what extent do not-for-profit organizations have the ability to choose among the following: a. Using depreciation, b. Ignoring depreciation, c. Maintaining building and equipment on the balance sheet at their original cost, d. Showing such assets at their market value, or e. Completely charging such assets

Capital Asset Pricing Model Assistance

Explain how the CAPM assists in measuring both risk and return. Explain how the CAPM assists in calculating the weighted average costs of capital (WACC) and its components. Illustrate why some managers have difficulty applying the Capital Asset Pricing Model (CAPM) in financial decision making. Identify the benefits and draw

Capital Budgeting Models: Example Problem

Following are the cash flows (equal in years 1-5) and a MARR for a proposal. MARR=14% Year 0 1 2 3 4 5 Cash Flow ($3,250) $500 $750 $1,100 $1,500 $1,200 a. Determine the Present Worth. Based on this, should the proposal be app

Payback, NPV, an IRR

Please help with the attached Corporate Finance Question regarding Payback, NPV, and IRR. I am looking for the calculations and work shown (any formulas) on how the answer was obtained. Corporate Finance Question: P10-21 Payback, NPV, and IRR Rieger International is attempting to evaluate the feasibility of investing

GAAP vs. IFRS and comparing IRR, NPV, and payback approaches

GAAP vs. IFRS The United States uses Generally Accepted Accounting Principles (GAAP) as the basis of financial reporting. The International Financial Accounting Standards (IFRS) is an alternative way to report financials. This article from Ernst and Young compares the two methods of financial reporting. Ernst & Young's US

Investment Appraisal Techniques

In the file attached is the Cash Flow Projection of two proposed projects. Both of these projects involve additions to DMart's highly successful product line and as a result, the required rate of return on both projects has been established at 12 percent. Please help to: (a) Briefly explain why the capital-budgeting proces

Payback Period, Net Present Value, and Internal Rate of Return

Three of the most commonly used techniques for evaluating possible capital projects are the Payback Period, Net Present Value, and Internal Rate of Return. Discuss the strengths and weaknesses of each of these three methods. Which technique do you think is the best method? Be sure to justify your choice of the best method.

Capital budgeting and estimating cash flows

1. What are the pros and cons of the decision rules for the NPV, the IRR, the MIRR, and the payback methods? Which is the most accurate method and why? 2. What are sunk costs? Should they be included in the cash flow estimation when making a capital budgeting decision? Why or why not?

Final Recommendation on Subway Franchise Opportunity

Develop a final recommendation on Subway franchise opportunity. The recommendation should include the following: - An executive summary - A decision objective regarding selection of franchise opportunity - Forecasts of franchise profits and cash flows(Included in attached document) - An estimated internal rate of return on

Discrepancies between income statement and balance sheet

S&J Plumbing, Inc.'s 2010 income statement shows a net profit before tax of $468, whereas the balance sheet that the company's equity for the fiscal year-end 2010 is $1,746. a) Calculate the company's return on equity and whether the managers are providing a good return on the capital provided by the company's shareholders.

Constructing and Analyzing PETA's Profit and Loss Statement

Hi, Please help with the following questions. Pet Energy Therapy Association (PETA) treats peoples' pets, and has the following cost structure: Charge per therapy session $150 Variable cost per therapy session $ 50 Fixed costs $200,000 They expect to perform 2,000 session

Capital Investment Applied to Healthcare Organization

Read the Capital Project Case Study and then use the data provided in the Capital Project Case Study (excel) to perform an analysis of a capital investment case study. Capital Case Study, Part 1 This case study considers the expected costs and benefits to a managed care organization resulting from a decision to design

Competition Bikes Inc. Storyline: Budgets And Budget Planning

Prepare a summary report in which you do the following: 1. Discuss budgetary items that raise concern in the budget planning. 2. Evaluate the flexible budget and its variances. a. Recommend corrective actions for areas of concern based on a variance analysis. b. Discuss how the concept of management by exception could be