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? - How would you explain the steps in developing the master budget? - What are the reasons behind adopting a zero-based 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
Need help writing an essay on the comfort levels in using hacking techniques to spy on competitors.
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
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
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
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
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
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 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
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
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
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
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?
What additional after-tax cash flow will be needed to maintain the same internal rate of return as would be experienced if no delay occurred?
Minnesota Metal Forming Company has just invested $500,000 of fixed capital in a manufacturing process, which is estimated to generate an after-tax annual cash flow of $200,000 in each of the next 5 years. At the end of year 5, no further market for the product and no salvage value for the manufacturing process is expected. If
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
What are the elements of Capital Budgeting? How do you determine these elements in the global business arena? How do you use Capital Budgeting Analysis determine the desirability of global projects?
List and explain the steps that you would take to develop an annual budget for a corporation?
CTC Mining Corporation - Capital Budgeting Decision-decide whether to mine the deposit-NPV & IRR Analysis
After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to mine the deposit. The most cost-effective method of mining gold is sulfuric extraction, a process that results in environmental damage. To go ahead with the extraction, CTC must spend $900,000 for new mining equipment and p
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?
See attached file for full problem description. Owen's enterprises is in the process of determining its capital budget for the next fiscal year. The firms current capital structure, which it considers to be optimal, is contained in the following balance sheet. Balance Sheet Current Asset
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?
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
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
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
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
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.