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Capital Budgeting


Many authors say that the NPV technique is the most desirable for capital investment analysis, yet surveys of managers consistently indicate that IRR is the most popular technique in practice. Why do you suppose this discrepancy exists?

WACC/Capital Budgeting for Adams Corp.

Adams Corp. is considering four average-risk projects with the following costs & rates of returns: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 $3,000 15.00% 3 $5,000 13.75% 4 $2,000 12.50% Adams has a cost of deb


Optimal capital budget Hampton Manufacturing estimates that its WACC is 12 % if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 12.5 %. The company believes that it will exhaust its retained earnings at $3, 250,000 of capital due to the n

Project Selection Via NPV

Projects with unequal lives Haley's Graphic Designs Inc, is considering two mutually exclusive projects. Both require an initial investment of $10,000, and their risks are average for the firm. Project A has an expected life of 2 years with after -tax cash inflows of $6,000 and $8,000 at the end of Year 1 and 2, respectively. P

Does MIRR solve all of IRR's shortcomings?

1: Investment scenarios: Assume you are working as an investment financial officer for your company: Make up an investment opportunity for your company and discuss key sensitivities (risks) and possible scenarios. Discuss a few risks or key assumptions and the effects of possible changes in their values 2: NPV versus IRR

Capital Budgeting for Tunney Industries

1. Cost of preferred Tunney industries can issue perpetual preferred stock at a price of $47.50 a share. The stock would pay a constant annual dividend of $3.80 a share. What's the company's cost of preferred stock, rp? 2. New project analysis: Campbell Company is evaluation the proposed acquisition of a new milling ma

Differential Analyses Report on Perfume

Prepare a differential analysis report as of April 5, 2006, presenting the additional revenue and additional costs anticipated from the promotion of cologne and perfume. See attached file for full problem description.

Present Value Analysis

You became incredibly wealthy one day and a huge contributing factor to your success was the education that you'd received at York/Atkinson. As a way to thank the school you set up an endowment today in the amount of $5,000,000. But you don't just hand over $5,000,000 just like that!!! You stipulate that York use the funds t

financial pros and cons for a company to go public

What are the financial pros and cons for a company to go public? What hurdles rates a capital project would not pass; the debt versus no debt option and associated risk and impact to financial statements. What key financial metrics would senior management want to have? If metrics included payback period, net present value, in

Expansion Spreadsheet Description

Need help completing yearly costs and answering Item V question D See attached file for full problem description. END OF YEAR 0 1 2 3 I. INVESTMENT OUTLAY EQUIPMENT CST $200,000.00 INSTALLATION $40,000.00 INCREASE IN INVENTORY $25,000.00 INCREASE IN ACCOUNTS PAYABLE $5,000.00 TOTAL NET INVES

Items on an Individual Budget

SCENERIO: JetSet Machinations New York heads the production of the jet lag prevention tablet, SmoothJet, which is effective in 98% of the adult population, and it carries a fully refundable guarantee. Key ingredients of the tablet include kava kava, which is obtained from Hawaii, melatonin, and a mild natural stimulant processe

Comparison of Capital Budgeting Techniques

Comparison of Capital Budgeting Techniques The Dilemma at Day-Pro The Day-Pro Chemical Corporation, established in 1995, has managed to earn a consistently high rate of return on its investments. The secret of its success has been the strategic and timely development) manufacturing, and marketing of innovative chemical pr

Setting up a Spreadsheet to Build a Net Present Value Model

Division leaders in JMI's airplane manufacturing plants have asked for your analysis for replacing old manufacturing equipment for standard planes with faster, more costly new equipment next year. This year, though JMI's innovative S2S-900 has experienced moderate initial success, the total aircraft sales have not been as great

Discussion Board

JetSet Machinations New York heads the production of the jet lag prevention tablet, SmoothJet, which is effective in 98% of the adult population, and it carries a fully refundable guarantee. Key ingredients of the tablet include kava kava, which is obtained from Hawaii, melatonin, and a mild natural stimulant processed and impor

Applied Nanotech NPV

Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 10 units per year at $0.3 million net cash flow per unit for the next five years. The engineering department has come up with the estimate that developing the machin

Various Managerial Accounting Problems

9.) The sales, income from operations, and invested assets for each division of Jamieson Company are as follows: Sales Income From Operations Invested Assets Division E $4,000,000 $550,000 $2,400,000 Division F 4,800,000 760,000 2,500,000 Division G 7,000,000 860,000 2,800,000 (a) Using the expanded expression, determin

International Finance and Capital Budgeting Analysis

1) An MNC is considering establishing a two year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12%. The required rate of return on this project is 18%. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage valu

Comprehensive Capital Budgeting Problem

Clayton Corporation is considering producing a new product. Autodial. Marketing data indicate that the company will be able to sell 35,000 units per year at $35. The product will be produced in a section of an existing factory that is currently not in use. To produce Autodial, Clayton must buy a machine that costs $310,000.

Profit Maximization and Stockholder Interest

Is profit maximization alone an appropriate goal for the firm? Why or why not? Who in a corporation is responsible for protecting and managing stockholders interest? How is profit maximization different from maximizing shareholder wealth?

Capital Budgeting

Capital Budgeting Spreadsheet Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected net cash flows Time Project A Project B 0 ($375) ($575) 1 ($300) $190 2 ($200) $190 3 ($1

Cash Flow

My company is considering buying new equipment with a cost of $625,000 and a salvage value of $50,000 at the end of its useful life of ten years. The equipment is expected to generate additional annual cash flow for ten years with the following possibilities: Probability Cash Flow .15

Pay Back Period

Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new

Financial Model Evaluation

There are two scenarios that I need assistance with. They are attached on one document. I need the solutions and answers to the questions.

Capital Budgeting in Excel

1. If two mutually exclusive projects were being compared, would a high cost of capital favor the longer-term or the shorter-term project? Why? If the cost of capital declined, would that lead firms to invest more in longer-term projects or shorter-term projects? Would a decline (or increase) in the WACC cause changes in the

Capital Investment Mini case study.

Conch Republic Electronics Spent $750.00 to develop a prototype (or Model) for a new PDA Spent an additional $200,000 for marketing study to determine the expected sales. Can manufacture the new PDA with variable cost for $86.00 each. Fixed Costs for the operation are estimated at $3 million per year. Unit Price

Monetary Policies

I am trying to write a paper on monetary policies and need some help understanding how expansionary and contractionary monetary policies impact the various components of U.S. economy. For example the effects of monetary policy on consumers, households, businesses, GDP, unemployment, budget, and trade deficits.