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Capital Budgeting

Difference between IRR and PI? Lease or Buy?

What are some differences between IRR and PI? What would Lisa Cross say about IRR? Why would an organization choose to lease an asset instead of buying it? Refer to the text and article by D.O. Burgess.

Capital Budgeting and Derivatives

It is August 8, 2005. You are a Financial Advisor. On July 20, 2005, you were contacted by management of Growing To Fast, Inc. (Company). They have asked you to help them turn the Company around. The Company has been in existence for 30 years manufacturing widgets that are used in the aerospace industry. The Company had be

Master's level Capital Budgeting

I need assitance in identifying the formulas needed to resolve my problem. (See attached file for full problem description) --- Jane Burns and Carl Foster started a computer store several years ago. The first couple of years were excellent, but then they began to fell the pressure of increasing competition; volume and

Depreciation method, Payback, Equal annual payments, NPV and IRR

PROBLEM #1A Given the data below, identify the depreciation method used for each depreciation schedule as of the following (please note that it is not necessary to show all calculations, but enough to show how you know which method is represented):   First cost  $80,000 Book depreciation l

Finance Problems

Which of the following component costs is expressed on an after-tax basis in the calculation of a firm's cost of capital? a. cost of debt b. cost of preferred stock c. cost of common equity d. b and c e. all of the above The component cost of a firm's preferred stock consists of a. the cur

Clearaway Upholstery: calculate investment alternatives for cash flows

QUESTION - CLEARAWAY UPHOLSTERY LIMITED a) Calculate the initial investment associated with each alternative. b) Calculate the incremental operating net cash inflows associated with each alternative. c) Calculate the terminal cash flow at the end of five years associated with each alternative. d) Make a recommend

Capital Budgeting decision and NPV

You have been asked by the president of your company to evaluate the proposed acquisition of a new hydropropolaser for the R&D department. The price for this equipment is $70,000, and it would cost another $14,000 to modify it for special use by your firm. The hydropropolaser, which has a MACRS 3-year recovery period (wts. 3

Present value of the benefit (savings) to refinancing

You currently have a 30-year fixed-rate mortgage financed at 7.25% on a $200,000 home. There are 25 years remaining on the mortgage. Your banker friend tells you that for a small fee (2% of the principal borrowed), you can refinance the remaining balance of your mortgage at a fixed rate of 5.75% for 25 years. What is the pres

Capital Budgeting Net Present Value Finance

Questions Part I: A: 1. Evaluate the tax shield from the interest tax deductibility 2. Evaluate the bonus from the subsidised loan granted by the European Bank for R&D 3. Calculate the Net Present Value of the project 4. Is it profitable for the FMI parent company? - B: FMI thinks that, starting in year two, it will be

Important Information About Profitability Index

Consider the following projects: Project Co C1 C2 A -$2,000 +$2,000 +$1,200 B -$2,000 +$1,440 +$1,728 a. Calculate the profitability index for A and B assuming a 22% opportunity cost of capital b. Use the profitability index rule to determine which proje

How do you appraise replacement decision by NPV?

?Draw ALL timelines and label them clearly ?ALL problems should be done by hand. If you wish to type them out, all formulas, calculations and equations must be shown. PROBLEM ONE Refresh Bottling Co. (RBC) is considering replacing one of its many bottling machines which was purchased five years ago for $52,000 with an es

How do you come up with a cash flows statement?

This is my last problem in this set and I am confused about what to use NPV / IRR? How do you come up with a cash flows statemement - like the one attached for this particular problem? I am very confused and hope that you can help. ** See ATTACHED file(s) for complete details **

Capital Budgeting Decisions of Choosing a Project

See the attached file(s). To whom it may concern, I have put together a solution for this problem but it is flawed. Please do the following: 1. Read the problem 2. Review my spreadsheet - I have put together an assumptions and Cash Flow for each option. 3. Help me ascertain which project is the best. Is there o

Multiple choice questions / T or F regarding working capital

Please state why you choose the selction so I can better understand the question. 1. Which of the following ratios does not measure working capital? a. quick ratio b. current ratio c. current-assets-to-total-assets ratio d. current-assets-to-sales ratio 2. Which of the following best illustrates the import

The Investment Detective

Suppose you are a new capital-budgeting analyst for a company considering investments in the eight projects listed in Exhibit 1. The chief financial officer of your company has asked you to rank the projects and recommend the "four best" that the company should accept. In this assignment, only the quantitative considerations

Capital Budgeting Development

Batteries Inc. is considering developing a new long life battery for cell phones. You can invest immediately and start production right away. Research effort cost $1m, marketing effort cost $0.5m (these are sunk costs) Production equipment cost $1m and will have a useful life of 5 yrs and will depreciate using the straigh

Compute and Analyze Critical Data Using Microsoft Excel Spreadsheet

I am thinking about aquiring another corperation. I have two choices; the cost of each is $250,000. I can not spend more than that, so acquiring both corperations is not an option. The following is my critical data I have put togther for each: Corperation A: Revenues= 100K in year one, increasing by 10% each year Expen

Finance: IRR, WACC, NPV, which project to accept

Project A has an internal rate of return of 15 percent. Project B has an IRR of 14 percent. Both projects have a cost of capital of 12 percent. Which of the following statements is most correct? a. Both projects have a positive net present value. b. Project A must have a higher NPV than Project B. c. If the cost of capit

Capital budgeting

Why is Capital Budgeting an important technique for companies wishing to assess an investment in projects? Which technique would you recommend to management?

Net investment, net cash flows, net present value and the Internal Rate of Return

1. The capital budgeting department is contemplating whether to purchase a piece of equipment. The new piece of equipment costs $900,000. The equipment currently being used by the firm would be replaced by the new and would be sold for $100,000 which is the firm's book value for the asset. The estimated useful life of the new eq