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
I do not actually need the 2500 words I just need help with the calcualtions. of the figures and the formulas if they are any. And also points on recommendations. This not an assignment but a past exam paper that was given to us to prepare for our upcoming exam.
Hello, Could someone help me with the following problem. Thanks! Please see the attached document. These are the questions: 1) Using net present value computations and ignoring income taxes, analyze the one year and two year development alternatives. At this time, ignore the potential introduction of a comparable product b
1) How would you define and quantify risk as used in capital budgeting analysis? 2) What is the purpose of using sensitivity analysis? 3) What must an analyst undertake in setting up a decision tree? <b>...Please see attachment for all questions...</b> 12) What benefits accrue to a company by goin
1) Lease vs. Purchase: The Hot Bagel Shop wishes to evaluate two plans, leasing and borrowing to purchase, for financing an oven. The firm is in the 40% tax bracket. Lease. The shop can lease the oven under a 5-year lease requiring annual end-of-year of $5000. All maintenance costs will be paid by the lessor, and insurance
Real Estate Finance: In a long-term decision model for project feasibility, what impact on a developer-owner's net present value would occur for each of the following changes in the model's assumptions? 1. Decrease in the net present value. 2. Increase in the net present value. 3. No change in the net present value.
In a long-term decision model for project feasibility, what impact on a developer-owner's net present value would occur for each of the following changes in the model's assumptions? 1. Decrease in the net present value. 2. Increase in the net present value. 3. No change in the net present value. Treat each item below
See attachment for complete questions Estimate the present and future values of the following income streams. The annual interest rate is 12% compounded monthly. The A Venture Capital is expected to grow at annual rate of 18% for the next four years, then at 12% for another three years, and finally settle down to a grow
1. Aspen Tech is considering undertaking a $69 million investment project with expected cash flows of $8.2 million per year for 15 years, beginning at the end of the first year. (Assume the first $8.2 million is received at the end of the first year, the second $8.2 million at the end of the second year, etc.) Aspen Tech plans
Following is an example from my study guide which I need assistance solving in order to complete similar problems for this week's assignments. 1. You are asked to evaluate a new product line. From talking with the engineering, marketing, and tax departments, as well as the vendors and banks, you arrive at the following assump
1. Applied Materials' long-term call options with a maturity of two years and an exercise price of $30 are selling for $3. AMAT's current stock price is $20 and it not expected to pay a cash dividend over the next two years. Assume an annual risk-free rate of 1.5 percent. (a) Is the call option in or out of the money? (b) Wh
1. Ajax is considering a new project, Clear Clean (CC). CC requires an additional machine that costs $20 million dollars. It will be fully depreciated to a zero book value on a straight-line basis over 4 years. Each year for 4 years, CC will have revenues of $20 million, variable operating costs of $10 million and fixed ope
1) Terminal Cash Flow - Replacement decision Russell Industries is considering replacing a fully depreciated machine having a remaining useful life of 10 years, with a newer more sophisticated machine. The new machine will cost $200,000 and will require $30,000 in installation costs. It will be depreciated under MACRS u
A company has the following for both June and July Per Unit : Sales Price 50 Direct Cost Material 18 Direct Wages 4 Variable Production Overhead 3 Per Month: Fixed Production Overhead 99000 Fixed Selling Expenses
Suppose that you are in the real estate business. You are considering the construction of an office building. The land would cost $50,000 and construction would cost another $300,000. Assume for the moment that a $400,000 payoff is guaranteed. The office building is not the only way to obtain $400,000 one year from now. How