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Capital Budgeting

Cash Flow - Marketing Study

A company has recently completed a $5,000,000 two-year marketing study. Based on the results of this study, the company has estimated that 500 units of its new hardware could be sold annually over the next 12 years, at a price of $100,000 each for the first 6 years. The sales price is expected to drop to $75,000 in years 7-12.

advantages and disadvantages of outsourcing labor

Question One: Discuss the advantages and disadvantages of outsourcing labor or component parts in the production process. Question Two: The theory of constraints can identify bottlenecks. How does one go about identifying and managing bottlenecks? Question Three: Net present value and internal rate of return are two met

Capital Budgeting Decisions Problems

Ex. 12-7 Renfree Mines, Inc., owns the mining rights to a large tract of land in a mountainous are. The tract contains a mineral deposit that the company believes might be commercially attractive to mine and sell. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associa

Net After-Tax Cash Flows & NPV

The law firm of bushmaster, cobra, and asp is considering investing in a complete small business computer system. the initial investment will be $35,000. the computer is depreciated on a straight-line basis over 5 years, and the firm's tax rate is 34%. the computer system is expected to provide additional revenue of $15,000 p

Capital Budgeting

What is Capital Budgeting, and how is it utilized? Are you able to utilize this concept at home, and if so, in what ways?

Weighted Average Cost of Capital and Financial Strategy

What does calculating the weighted average cost of capital tell you about Foust company's Financial strategy including the level of risk involved in the business? How could the company use WACC calculations in determining future investments? Year EPS Growth Rate 1993 3.9 7.95% 1994 4.21 8.08% 1995 4.55 7.91% 1996

Zero-based budgeting (ZBB)

The comprehensible master budget plan encompassing all the individual budgets related to sales, cost of goods sold, operating expenses, capital expenditures, and cash. The master budget encompasses all functions and management levels, although the approach to formulating the budget may differ from company to company. Two opposit

Solver - Excel

Someone has determined that the firm's capital investment budget will be $5,000,0000 for the upcoming year. Unfortunately, this amount is not sufficient to cover all the positive NPV projects that are available to the firm. You have been asked to choose which investments, of those listed in the table should be made. (Table

Financing: Trebor Pharmaceutical

Some capital-budgeting choices require managers to decide between upgrading high-technology research equipment and not upgrading. How would financial managers at Trebor Pharmaceutical, a drug manufacturer, use discounted-cash-flow models in their decision-making process? Be sure to address the impact not replacing the equipment

What does the master budget include?

- What does the master budget include? - How would you explain the steps in developing the master budget? - What are the reasons behind adopting a zero-based budget?

Capital Budget

The following facts apply to your company: Target capital structure: 50% debt; 50% equity. EBIT: $200,000,000 Assets: $500,000,000 Tax Rate: 40% Cost of new & old debt 8% Based on the residual distribution policy (with all distributions in the form of dividends), the payout ratio is 60 percent. How

Hacking Techniques

Need help writing an essay on the comfort levels in using hacking techniques to spy on competitors.

How can a person evaluate business investments?

I am writing a paper on how a company can evaluate investments and would like to know 1) Besides net present value(NVP) and internal rate of return(IRR), what other criteria do companies use to evaluate investments? 2) What are some disadvantages of NPV as an investment criterion? 3) How will a change in cost of capita

Five Finance Problems

1. Firm A's capital structure contains 20 percent debt and 80 percent equity. Firm B's capital structure contains 50 percent debt and 50 percent equity. Both firms pay 7 percent annual interest on their debt. The stock of firm A has a beta of 1.0 and the stock of firm B has a 1.375 beta. The risk free rate of interest equals

Use of profitability index

You are asked to evaluate two projects for Adventures Club Inc. Using the net present Value method combined with the profitability index approach, which project would you select? Use a discount rate of 12 percent. Project X (trips to Disneyland) Project Y (international film festivals) ($10,000 Investment) ($22,000 i

Capital Structure

1) Blake Systems follows a strict residual dividend policy. The company estimates that its capital expenditures this year will be $40 million, its net income will be $30 million, and its target capital structure is 60 percent equity and 40 percent debt. What will be the company's dividend payout ratio? a. 80% b. 60%

Comparing Mutually Exclusive Projects, Bond Price Movements, Capital Gains versus Income, Arithmetic and Geometric Returns, Interest Rate Risk, Profitability Index, EAC, NPV, Interest Rate Risk, Investment Returns, Project Analysis, Stock price with non constant growth in dividends, average return and standard deviation of return, Coupon Rates, Real Rates of Return, Stock Values

Question 1: Comparing Mutually Exclusive Projects Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,910,000 and will last for 3 years. Variable costs are 38 percent of sales, and fixed costs are $139,000 per year. Machine B costs $4,390,000 and will last for 6 ye

Healthcare related economics and accounting

2. For what sorts of inventory and supply items is just-in-time management a reasonable goal? Explain. 3. What are the advantages of leasing? 4. What prevents most health care organizations from initiating commercial paper for short-term financing? 5. What makes the profitability index better than the net present

Budgets

With so many budgets types available to companies, what types of budgets do you think would be effective for the Coca-Cola Company? Why?

Future and Present Value

Future Value If you invest 9,000 today, how much will have: a. in 2 years at 9 percent? b. In 7 years at 12 percent? c. In 25 years at 14 percent? d. In 25 years at 14 percent (compounded semiannually)? Present value How much would have to invest today to receive: a. 15,000 in 8 years at 10%? b. 20,000 in 12 yea

Country Analysis Financial Recommendation

Global management/Industry market and country analysis Forecasted financial costs and benefits that Riordan might expect from implementing this project. Your projections should include the following: a. The instruments you will use to finance your project and their costs, including the project's weighted average cost of cap

Capital Budgeting with Hedging

Baxter Co. Considers a project with Thailand's Government. If it accepts the project, it will definitely receive one lump sum cash flow of 10 million Thai baht in five years. The spot rate of the Thai baht is presently $0.03. The annualized interest rate for a 5-year period is 4 percent in the United States and 17 percent in Tha

Capital Budgeting: Relationship Between Required Return

What are the relationships between required return, cost of financing, and investment decisions. Why does capital budgeting rely on analysis of cash flows rather than on net income? The term "Capital Rationing" is a constraint on the amount of funds that can be invested in a given period by a firm. Explain why at times ma

What is the net present value of this payment?

An aircraft company has signed a contract to sell a plane for $20 million. The firm buying the plane will pay for it in 5 annual payments (at year end) of $4 million. If the firm's cost of capital is 6%, what is the net present value of this payment?

A)What is the initial investment outlay in Year 0 associated with this machine for capital budgeting purposes? B)What are the incremental operating cash flows in Year 1, 2, and 3? C)What is the terminal cash flow in Year 3? D)If the projects required rate of return is 12 percent, should Ewert purchase the machine?

The Ewert 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 by the firm. The machine falls into MACRS 3-year class, and it would be sold after three years for $65,000 (See Table 13A.2 for MACRS recovery pe

Capital Budgeting Practice Problem

If a firm uses external financing as a plug item, has a new capital budget of $2 million, a net income of $3 million, and a plowback ratio of 40%, how much should be raised in external funds?