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# Capital Budgeting

### 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

### Integrative Problem for Caledonia Products

Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR PROJECT A PROJECT B 0 &#8722;\$100,000 &#8722;\$100,000 1 32,000 0 2 32,000 0 3

### 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,

### IRR NPV of Two Projects

Comparing two projects Project A cost of capital of 12% life of project is 20 years annual cash flow 350,000 initial cost 1,250,000 salvage value 250,000 project b cost of capital of 12% life of project is 20 years annual cash flow 400,000 initial cost 1,400,000 salvage value 110,000 What is the payback perio

### 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

### Present value

How is the present value of a lump sum related to the present value of a stream of payments? How is this helpful for retirees that are considering taking a lump sum payment in lieu of monthly pension payments?

### Present Value Concept

Which one of the following best describes the concept of present value? A. The value today of all future cash flows discounted to the present at the rate of return required by investors. B. Sum of all future business returns. C. An expert's best guess as to what a firm is worth. D. A value derived from a table of presen

### 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

### Calculating NPV and IRR to Determine Maximum Deviation

You are considering opening a new plant. The plant will cost \$100 million upfront and will take one year to build. After that, it is expected to produce profits of \$30 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this opportunity if your cost of capital is

### 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

### Investment project: payback period, discounted, NPV, IRR.

Consider an investment that costs \$100,000 and had a cash inflow of \$25,000 every year for 5 years. The required return is 9% and required payback is 4 years. Wwhat is the payback period? What is the discounted payback period? What is the NPV? What is the IRR? Should we accept this project? What decision rule should b

### Present Value Discounted Back 5 Years

What's the present value of \$1,525 discounted back 5 years if the appropriate interest rate is 12%, compounded monthly?

### 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

### Ratios, Contribution Margin, NPV, IPOs, Forecasting and Budgeting and Financial Professions

Please answer the 6 six questions in the attachment. Multiple Choice 1. Which of the following ratios would tell an investor about the profitability of the organization? a. Acid test ratio b. Debt ratio c. Return on equity d. Times interest earned e. Current ratio 2.

### Capital Planning for a Healthcare Organization

What is meant by capital planning? Why is IRR important to an organization? Why is NPV important to a project? How would you select from multiple projects presented to your organization?

### 1) Currently, the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECT? 2) A stock has an expected return of 12.60%. Its beta is 1.49 and the risk-free rate is 5.00%. What is the market risk premium? 3) For the purpose of Millar's cash flows, what is your estimate of the company cost of equity? 4) If the company's weighted average cost of capital is 11 percent, what is the current value of operations, to the nearest million. 5) If Target sells the old machine at market value, what is the initial after-tax outlay for the new printing machine?

1) Currently, the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECT? a) An index fund with beta =1.0 should have a required return of 11% b) If a stock has a negative beta, its required return must also be negative c) An index fund with beta =1.0 sh

### Cash, currencies

1. Which of the following actions are likely to reduce the length of a company's cash conversion cycle? (A) Adopting a just-in-time inventory system which reduces the inventory conversion period. (B) Reducing the average day's sales outstanding (DSO) on its accounts receivable (C) Reducing the amount of time the company takes

### Capital Budgeting

1. If an investment project has an internal rate of return equal to the interest rate, the NPV for that project: (A) Is negative (B) Is positive (C) Is Zero (D) May be either positive or negative 2. The Balistan Rug Company is considering investing in a new loom that will cost \$12,000. The new loom will create positive en

### Present Value

What's the present value of \$1,500 discounted back 5 years if the appropriate interest rate is 6%, compounded semiannually? a. \$956.95 b. \$1,007.32 c. \$1,060.33 d. \$1,116.14 e. \$1,171.95

### Finance problems

OTA, Please underline the final answer and display all calculations used to reach solution (Word not Excel). Thank you. 1. Hilton Hotels is planning to open a new hotel in Dubai at an initial investment of \$20 million. It expects positive cash flows of \$4 million a year at the end of each of the next 20 years. The project'

### Multiple choice

1. Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership? A) Corporations generally face fewer regulations. B) Corporations generally face lower taxes. C) Corporations generally find it easier to raise capital. D) Corporations en

### How is a stock's beta computed?

1. How is a stock's beta computed? 2. Does a bond's time to maturity ever equal its duration? Please explain. 3. Are the valuation models for common stock with constant, zero growth dividend payments and for preferred stock very similar? Please explain. 4. How do mutually exclusive and independent investment projects di

### Use the Marketing area to enter a Price, Promotional Budget, Sales Budget, and Sales Forecast for each product. Accounts Receivable (A/R) and Accounts Payable (A/P) finance decisions are also entered in the Marketing area.

Rules for Marketing. Use the Marketing area to enter a Price, Promotional Budget, Sales Budget, and Sales Forecast for each product. Accounts Receivable (A/R) and Accounts Payable (A/P) finance decisions are also entered in the Marketing area. Although the marketing area provides a Computer Prediction, this is a rough estim

### Carter Inc. is evaluating a security. One-year Treasury bills are currently paying 9.1 percent. Calculate the investment's expected return and its standard deviation. Should Carter invest in this security? Determine each project's risk-adjusted net present value.

6.1 (Expected rate of return and risk) Carter Inc. is evaluating a security. One-year Treasury bills are currently paying 9.1 percent. Calculate the investment's expected return and its standard deviation. Should Carter invest in this security? Probability Return 0.15 6% 0.3 9% 0.

### Capital Budgeting for Project NPV

Project NPV 1. Suppose a firm is considering the following project, where all of the dollar figures are in thousands of dollars. In year 0, the project requires \$37,500 investment in plant and equipment, is depreciated using the straight-line method over seven years, and there is a salvage value of \$5,600 in year 7. The proje

### Case analysis: Reto and Torgler purchase of equipment: IRR, rate of return

Reto S.A. In December 2004, R. E. Torgler was trying to decide whether to add a new line of injection molded plastic products to those already manufactured and distributed by Reto S.A. In order to do so, the firm would have to buy new injection molding equipment; none of the existing equipment could be adapted to perform t

### What is the break-even point, profit, leverage, combined leverage for Healthy Foods, Inc.

Healthy Foods, Inc., sells 50-pound bags of grapes to the military for \$10 a bag. The fixed costs of this operation are \$80,000, while the variable costs of the grapes are \$.10 per pound. a. What is the break-even point in bags? b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. c. What is the degree of