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Capital Budgeting

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

Finance - NPV

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

What do I use to measure this project NPV / IRR?

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 **

Payback NPV IRR - Choosing a project

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 other metrics to choose from

Payback NPV IRR - choosing a project

To whom it may concern, I have put together a solution for this problem but it may be 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. I am choosing Option #2 Wilson - it ha

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

Payback period, ARR, NPV, & PI

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

Capital Budgeting & Investment problems

Question 1 Apex Ltd. is an Australian operated company with mainly American resident shareholders. The company is currently in the process of comparing two mutually exclusive machines for use in a new project with Machine A costing $30,000, having a useful life of five years and machine B costing $45,000 and having a useful l

Captial Budgeting and Staged Entry

Summary given in attachments "Page2" and "Page3." Questions given in attachment "Page4" Example: 1. Consider the land acquistions for Stage 1. a) What cosem if any, should be attributed to the catfish project? b) Assuming that the currently owned site is used for this project, how s hould the Gulf Shrimp Processing Divis

Financial Case Study

For the following assignment, I am tasked to analyze the company, Genworth Fin ancial. I would like some assistance with understanding key elements of the assignment so that I can successfully write this lengthy paper. I have provided the website of the company which includes key financial data. http://investor.genworth.

IRR

Unlike the net present value criteria, the internal rate of return approach assumes an interest rate equal to ________ the relevant cost of capital, the project's IRR, the project's opportunity cost, or the market's interest rate please advise answer & why - thanks!

Capital Budgeting: This is an application of capital budgeting that integrates the projection of a basic cash flow and the computation and analysis of six capital budgeting tools. Your company is thinking about acquiring another corporation. You have two choices; the cost of each choice is $250,000. You cannot spend more than that, so acquiring both corporations is not an option. The following are your critical data:

This is an application of capital budgeting that integrates the projection of a basic cash flow and the computation and analysis of six capital budgeting tools. Your company is thinking about acquiring another corporation. You have two choices; the cost of each choice is $250,000. You cannot spend more than that, so acquir

How do I calculate the NPV and IRR of this project?

Example of the problem: I have 11 capital projects that are all being analyzed except one. Why should this project not be evaluated? What is the calculated NPV (discounted at the WACC) and the IRR of this project? Should the project be undertaken? Why? The estimated WACC as of January was 10.6% Projected cost $6M. This

Evaluation of a environmental capital project

I have 11 capital projects that are all being analyzed except one. I am attempting to explain why this project was not evaluated. I then need to calculate the NPV (discounted at the WACC) and the IRR of the project. Then I need to decide if the project should be undertaken and why or why not. The estimated WACC as of January

Present Value

Project A: present value (PV) of cash inflows is $55,000 and the PV of the cash outflows is $50,000. Project B: PV of cash inflows is $24,000 and the PV outflows is $20,000. All of the following are true except ______. the net present value of Project A is $5,000, the net present value of Project B is $4,000, the profita