IT and Information Management Case #2 ROI The company ACME Real Estate (ARE) provides real estate services including property sales, leasing, and management; corporate services, facilities, and project management; mortgage banking; investment management and capital markets; appraisal and valuation; and research and consu
In general, the value of land currently owned by a firm is irrelevant to a capital budgeting decision because the cost of the property is a sunk cost? a. True. b. False.
Has option analysis become more or less important for capital budgeting analysis in recent years?
Why is the net present value method the optimal capital budgeting method?
Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to opera
Given the following project cash flows, identify the correct statement(s). The firm's cost of capital is 15%. Cash Flow 0 -50 1 150 2 75 3 -10 I. This project will have two IRRs. II. The NPV of the project is $180.57. III. The profitability index of the project is 2.61. IV. The payback period of
1) Calculating yield and years till maturity 2) Analyze the risk of a portfolio 3) Calculate IRR 4) Calculate NPV and IRR 5) Calculate project cash flows, NPV, and IRR 6) Calculate the Weighted Average Cost of Capital 7) Determine the capital structure of a firm 8) Analyze an IPO 9) Calculate break-even points 10) Calculate and analyze the degree of operating leverage
1) Calculating yield and years till maturity Fill in the table below for the following zero coupon bonds. The face value of each bond is $1,000. Yield to Price Maturity Maturity $300 30 ? $300 ? 8% ? 10 10% 2) Analyze the risk of a portfolio Use the data below and consider portfolio
A company plans to acquire a piece corporate aircraft costing $5,000,000. The aircraft is expected to save the company $1,200,000 per year for each of its 5 year useful life. It will be depreciated straight line over 5 years. The firm's cost of capital is 12%. Its tax rate is 40%. It will replace another aircraft that was acquir
1. How would you define and quantify risk as used in capital budgeting analysis and what is the purpose of using sensitivity analysis?
Capital Budgeting- 30 questions on Capital Budgeting- Discounted Payback, NPV, Investment, IRR, modified , point of indifference, internal rate of return (MIRR), WACC, risk-adjusted discount rate
Please assist me with the following problems relating to discounted payback, NPV, investments and more. 1. Haig Aircraft is considering a project which has an up-front cost paid today at t = 0. The project will generate positive cash flows of $60,000 a year at the end of each of the next five years. The project's NPV is
Hercules Exercising Equipment Co. purchased a computerized measuring device two years ago for $60,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $23,800. A new piece of equipment will cost $150,000. It also falls into the five-year category for MACRS depreciation. Ass
Explain if you think they're good or bad.
1. List and briefly describe the four components of working capital? 2. What is zero working capital and why would a company strive to achieve this? 3. Explain cash flow synchronization and at least 2 techniques that would be used to accomplish this. 4. Identify and briefly define the four variables of credit poli
Question: Explain how the concept of risk can be incorporated into the capital budgeting process.
Does capital rationing impact maximization of shareholder wealth? Explain.
Multiple Choice Questions: suspense account, share capital, production overhead absorption rate, absorption cost, actual level of activity, current market price of share, profits, special order, cost of capital
1. A trial balance does not balance. The difference has been entered in a Suspense account. The following errors are found. 1. The purchase ledger Control account balance of $ 48300 has been included as a debit balance. 2. Provision for depreciation has been overcast by $960. 3. A Cash payment of $630 for rent has
The directors of Makeit Ltd. Propose to buy a machine costing $300,000. At the end of 5 years the machine will be sold for $ 50,000. In each of the 5 years the machine will increase revenue by $160,000. Increased annual expenditure of $ 80,000 will be incurred. Makeit Ltd. will require an increase in working capital of $40,000.
Although he was hired as a financial analyst after completing his MBA, Richard Houston's first assignment at Chicago Valve was with the firm's marketing department. Historically, the major focus of Chicago Valve's sales effort was on demonstrating the reliability and technological superiority of the firm's product line. Howeve
Find the value (i.e., savings or loss) of purchasing and running the new boat for 15 years (instead of the Cynthia II).
Graham Dodd, the controller of the New Economy Transport Company was evaluating a replacement of the Cynthia II, one of the boats NETCO used to push barges up and down the Mississippi and Ohio Rivers. The Cynthia II was carried on their books at a net value of only $30,000, but it could probably be sold 'as is' along with an ext
"Capital Budgeting" Answer the following questions: 1)There is uncertainty in the market research forecasts from which you derive information to include in your own volume and price inputs for a financial proposal. How do you incorporate this uncertainty into your analysis? 2)If the land, which would be used for t
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 options. The following are your critical data: a. Corporation A: 1) revenues = 100K in year one, increasing by 10% each year. 2)
Each answer should be between 200-300 words. 1. What is the concept of marginal cost of capital? 2. Would you expect the cost of capital to be different for an e-business versus a "brick and mortar" business? Why? 3. How would you modify your capital budgeting decision analysis to account for periods of inflation?
Capital Budgeting-proposed acquisition of a new special- purpose truck: net investment in the truck, operating cash flow in Year 1, terminal year non-operating cash flows, NPV,
You have been asked by the President of your company to evaluate the proposed acquisition of a new special- purpose truck. The truck's basic price is $50,000, and it will cost another $10,000 to modify it for special use by your firm. The truck falls in the MACRS 3-year class, and it will be sold after three years for $20,000. T
Please prepare a project analysis of the proposed ambulatory surgery center. Please prepare this analysis using two scenarios: A. 20 procedures a day and B. 25 procedures per day. You will need to compute the expected cashflows for the project. The starting point is the calculation of the net income after taxes for the p
The following table shows two schedules of prospective operating cash inflows, each of which requires the same net initial investment of $10,000 now: Annual Cash Inflows Year_________Plan A________Plan B 1____________$1,000________$5,000 2_____________2,000_________4,000 3_____________3,000_________3,000
1. Compute net present value. 2. Compute internal rate of return. 3. Compute accrual accounting rate of return based on net initial investment. Assume straight-line depreciation.
Hammerlink Company has been offered a special-purpose metal-cutting machine for $110,000. The machine is expected to have a useful life of eight years, with a terminal disposal value of $30,000. Savings in cash operating costs are expected to be $25,000 per year. However, additional working capital is needed to keep the machine
Capital Budgeting Decisions with uneven cash flows: Southern Cola. Calculate Net present value, Payback period, Internal rate of return, Accrual accounting rate of return based on net initial investment.
Capital budgeting with uneven cash flows, no income taxes. Southern Cola is considering the purchase of a special-purpose bottling ma chine for $23,000, It is expected to have a useful life of four years with a $0 terminal disposal value. The plant manager estimates the following savings in cash operating costs: ____Year_
I would appreciate receiving a detailed draft response to the questions posed in the attached case study regarding capital budgeting. Please show any formulas and references used. References available on the Internet would be helpful.
1. You own $100,000 worth of Smart Money Stock. One year from now, you will receive a dividend of $2 per share. You will receive a $4 dividend two years from now. You will sell the stock for $50 per share three years from now. Dividends are taxes at the rate of 28%. Assume there is no capital gains tax. The required rate o
**Please see attachment for multiple choice options. 1. For a typical firm with a given capital structure, which of the following is correct? (Note: All rates are after taxes.) 2. Which of the following approaches to estimating the cost of common equity is the least difficult to estimate? 3. Wyden Brothers has no