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Capital Budgeting

Capital Budgeting: How to Calculate the NPV of a Project

Global Technology is considering investing in a new computer system. The system would be used for all of the firm's business applications and is expected to yield the following (incremental) benefits (with all other yearly flows remaining constant): * Additional sales revenue of $50,000 per year, given the fact that the sy

If the appropriate discount rate is 10%, what is the NPV of the contract?

Today a firm signed a contract to sell a capital asset for $90,000. The firm will receive the payment five years from today. The asset costs $60,000 to produce, payable immediately. a. If the appropriate discount rate is 10%, what is the NPV of the contract? b. At what discount rate will the firm break even on the sale of th

determine the company's optimal capital budget

Managers are trying to determine the company's optimal capital budget for the upcoming year. The company is considering the following projects: Project Size Rate of Return Risk A $ 200,000 16% High B 500,000 14 Average C 400,000 12 Low D 300,000 11 High E 100,000

Cost Accounting Problem

Harris Corporation provides the following data on a proposed capital project: Initial investment $200,000 Expected useful life 4 years Increase in annual net cash inflow (before taxes) $66,000 Required rate of return 12% Income tax rate 25% Harris uses straight-line depreciation method with no salvage value. R

Maintain residual dividend policy and keep optimal capital

1) Driver Corporation has plans calling for a capital budget of $60 million. Its optimal capital structure is 60 percent equity and 40 percent debt. Its earnings before interest and taxes (EBIT) were $98 million for the year. The firm has $200 million in assets, pays an average of 10 percent on all its debt, and faces a marginal

The Task and Risk Management Plan

I have written the Project Plan Overview on Uncle Paula's Coffee Nook and selling as a franchdise. I need to do a task and risk management plan and I need to answer the following question in this plan: 1-5 questions 1. specific tasks and milestones required for the project plan of Uncle Paula's 2. five specific project risks

International Environment and Capital Budgeting Decisions

3. What is capital budgeting? How is this process complicated in the international environment? 4. Discuss relevant returns as they relate to financial return perspectives. Provide examples of returns from both the project and parent perspectives.

Average rate of return method

The capital investment committee of Nature ` s Beauty Landscaping Company is considering two capital investments. The estimate income from operations and net cash flows from each investment are as follows. (see chart in attached file) Each project requires an investment of $80,000. Straight-lin

Capital Budgeting: What is IRR and Payback period

Hoskins is considering the purchase of one of FCS's standard fluid control systems which costs $90,000 including taxes and delivery. It would cost Hoskins another $5000 to install the equipment, and this expense would be added to the invoice price of the equipment to determine the depreciable basis of the system. A life of 5 ye

Capital budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl has frequently run out of cash. This has necessitated late payment on certain orders, which, in turn, is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to hav

Investment Portfolio Research

I have to research the attached securities and summarize the research results, but I'm having trouble finding information on the Bond and CD. Please help me get started on my research. Also, when researching these types of securities for an investment portfolio, what information should I be looking for and where do I find it

Change Model

A. Explain where this project (attached) fits on the continuum of short-term, small-scale and long-term, large-scale changes. b. Select an appropriate change model (or change models) for the project. c. Develop a plan to address the human critical success factors for the project. d. Recommend measures to monitor th hu

Models and theories of change management

A. Identify five different models or theories of change. Discuss the validity and utility of these models. b. Explain in detail the human implications of major organizational change, focusing in particular on changes that result from the implementation of new technology. Analyze the critical success factors for organization

Incremental operating cash flow statements

Mini Case a-c Page 580 a. Set up, without numbers, a time line for the project's cash flows. b. 1) Construct incremental operating cash flow statements for the project's 4 years of operations. 2) Does your cash flow statement include any financial flows such as interest expense or dividends? Why or why not? c. 1) Sup

Free cash flows, NPV, Profitability Index, and the IRR Problem

Please see problem below. I would like it done in Excel. I've tried working on it a couple of times but I don't think I'm getting it right. Thanks. Windex Corporation, a firm in the 38 percent marginal tax bracket with a 17.5% required rate of return or cost of capital, is considering a new project. This project involves th

Return on Equity vs. Return on Capital

You know that when expanding and investing in projects overseas as Acme plans to, it is essential to understand such things as Return on equity (ROE) and Internal rate of return (IRR). Using Internet sources , Gather information on ROE and IRR. (you may want to start with the websites listed below) Return on Equity vs

Present Value Problem

I am having problem with this exercise. I know how to calculate the present values and future values, but this problem has a lot amounts that I am not sure which one I should work on to prepare the entry as the instruction asks: Pizza Inn charges an initial fee of $600,000 for a franchise, with $120,000 paid when the agreemen

Sunshine Corporation Capital Budgeting - Project Selection

Sunshine Corporation is considering several long-term investments. Management wants to accept the two best projects, given the following data: Project A B C D E Present value of net cash inflows . . . . . . . . $24,000 $44,000 $15,000 $30,000 $50,000 Investment cost . . . . . . . . . . 20,000 40,000 16,000 24,000 41,000

Calculating the weighted average cost of capital

A Company (BrainM plc) has 10 million ordinary shares of 50p each in issue out of an authorised ordinary share capital of 12 million. The company has recently paid a dividend of 12p per share on the ordinary shares, which are currently listed at 112p ex div. The dividend growth rate has recently been a little under 10% p.a., a

Capital budgeting

The five most popular capital budgeting decision rules taught in universities are the payback method, the discounted payback method, the net present value (NPV) method, the profitability index, the internal rate of return (IRR), and the modified IRR (MIRR) method. Briefly describe each decision rule to include the relationship a

Project Evaluation

Describe the following project evaluation processes: Payback, NPV, PI, and IRR. Is any one-evaluation process better the others? Why?

Dime a Dozen Diamonds - Accounting Break-Even Level and NPV Break-Even Level

(See attached files for full problem description) Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery

Master Budget

List the features and advantages of a master budget. Also, distinguish between the components of master budget.

Budget Assignment

A. Identify the stages of the budgeting process and evaluate their effectiveness. b. Evaluate the level and validity of detailed assumptions used to create budget estimates. c. Discuss the role of the budget as an analytic tool that can be used to evaluate organizational performance. d. Explain h

Capital Expenditures

Why do most companies prefer to use the present value or internal rate-of-return methods to value capital expenditures, rather than the payback method or average return on assets or equity methods? In compiling the forecasts for the annual cash flows in a capital expenditure solution, interest or depreciation are not include

Capital Investment Decisions

Should We Purchase That New Copier? Campus Print Shop is thinking of purchasing a new, modern copier that automatically collates pages. The machine would cost $22,000 cash. A service contract on the machine, considered a must because of its complexity, would be an additional $200 per month. The machine is expected to last eig