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# Capital Budgeting

### What are earnings if the owners put up the \$100? Firm's weighted-average cost of capital at various combination of debt and equity. What is the firm's optimal capital structure? If the net present value method is used, which investment(s) should the firm make? Construct a pro forma balance sheet that indicates the firm's optimal capital structure.

Firms' weight average cost of capital and other questions: 1. A firm needs \$100 to start and expects: Sales \$200 Expenses \$185 Tax rate 33% of earnings a. What are earnings if the owners put up the \$100? b. If the firm borrows \$40 of the initial at 10%, what are the profits rece

### Discussion analysis

Need to discuss my findings for the following problems. Discussion should be 1 paragraph long for both questions. (See Attachments) --- 1. Edelman Engineering is considering including two pieces of equipment, ________________________________________ Edelman Engineering is considering including two pieces of equipment, a t

### Time-phased budget for implementing software. Identify the primary cost drivers

Practice problem- no grade Revise Excel Spreadsheet (attached) to a time-phased budget for implementing software. Identify the primary cost drivers. Do not need to worry about depreciation of the software. Need to focus on understanding what the costs are, and when those costs will be incurred during the implementation pr

### Capital Budgeting for major expansion: Calculate the NPV for the project.

A company is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay associated with the expansion would be \$1,950,000 and the project would generate incremental after-tax cash flows of \$450,000 per year for six years. The appropriate requ

### Capital Budgeting: The payback period, NPV and Profitability Index

A company is considering replacing a five-year old machine that originally cost \$50,000, presently has a book value of \$25,000 and could be sold for \$60,000. This machine is currently being depreciated using the simplified straight line method down to a terminal value of zero over the next five years, generating depreciation of

### Capital Budgeting

A company is considering replacing one of its machines with a new, more efficient machine. The old machine presently has a book value of \$100,000 and could be sold for \$60,000. The old machine is being depreciated on a simplified straight line basis down to a salvage value of zero over the next five years, generating depreciatio

### Suppose you are the chairperson of the Fed's Board of Governors...

Suppose you are the chairperson of the Fed's Board of Governors at a time when the economy is depressed, and you are called to testify before a congressional committee. Write an explanation for an interrogatory senator outlining how your expansionary acts would operate and what would be the effects on the economy?

### Hilton, Chapter 18, Case 18.48, River Beverages (BUDGET)

Overview River Beverages is a food and soft-drink company with worldwide operations. The company is organized into five regional divisions with each vice president reporting directly to the CEO, Cindy Wilkins. Each vice president has an R&D department, controller, and three divisions; carbonated drinks, juices and water, and

### Capital Budgeting

5 questions on NPV, IRR, Cost of Capital, Financial planning (See attached file for full problem description) --- 1. Banner Forklift, Inc. has identified the following two mutually exclusive projects: (a) Apply NPV and IRR to decide which of these two projects you would accept. The required return on the project is 1

### Cash Equation, Cash Collections, Capital Structure...

1. Cash Equation. Stabbing Westward Company has a book net worth of \$21,000. Long-term debt is \$5,000. Net working capital, other than cash, is \$8,500. Fixed assets are \$8,000. How much cash does the company have? If current liabilities are \$4,000, what are current assets? 2. Calculating Cash Collections. The following i

### Internal Rate of Return

Katie, wants to know if her investments during the past four years have earned at least a 12% return. Four years ago she had the following investments. a)She purchased a small building for \$50,000 and rented the space in it. She received rental income of \$8,000 for each of the four years and then sold the building this year f

### ROI

What ROI would you expect on a new strategic program or service?

### Critical Data Sources

In evaluating the implementation of a new strategic initiative in an organization, what would be the critical data sources you would utilize to predict financial performance?

### Multiple choice questions

I'm not understanding these questions not in textbook. --- ECON 221 PT3 1. According to classical economics: a. markets will always be in equilibrium b. interest rates will fall whenever savings are greater than investment c. falling prices will lead to a reduction in unemployment d. price flexibility will bring abou

### Capital Budgeting, Probability, Quartile

4. Two electrical systems are being compared for a new industrial plant. The one system will have first cost of \$200,000 and annual operating costs of \$10,000. The second system will have first cost of \$300,000 and annual operating costs of \$5,000. Each system will be depreciated over a period of 10 years using straight line

### Projected budget

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: Corporation A: Revenues = 100K in year one, increasing by 10% each year. Expenses =

### Budgeting behavioral implications

Budgeting behavioral implications Crunch numbers is a manufacturer of calculators In the budget setting process, budget A was put together by lower and middle management. Budget B was put together by senior management. A B Unit sales 20,000 30,000 dollar sales \$600,000 \$900,000 less variable expenses:

### Working capital management and Operating cycle

Q1 Two companies, A and B, have the following balance sheet accounts: A B Current assets \$ 150 \$ 800 Fixed assets 300 2200 Current liabilities 75 600 Long-term debt 75 1000 Equity 300 1400 a. Compute values for all of the ratios that measure working capital for firms A and B. b. Compare Firm A to B with regards to its

### Calculating the Net Present Value of an Investment and Recommending a Decision

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs \$2 million, and preparing the slope and installing the lift costs another \$1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the

### Golden Gelt Giftware: Project Evaluation, NPV of project

Project Evaluation The following table presents sales forecasts for Golden Gelt Giftware. The unit price is \$40. The unit cost of the giftware is \$25. Year 1: Unit of Sales: 22,000 Year 2: 30,000 Year 3: 14,000 Year 4: 5,000 Thereafter: 0 It is expected that net working capital will amount to 20 percen

### NPV versus IRR: At what interest rate would you prefer Project A to B; what is IRR?

NPV versus IRR. Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A -\$20,000 +\$8,000 +\$8,000 +\$8,000 B -\$20,000 0 0 +\$25,000 a. At what interest rates would you prefer project A to B? Hint: Try

### Profitability Index

Colorado Texas New Line Replace Acquire Pollute Cumulative NPV 0 \$(1,319,000) \$(3,534,000) \$(1,582,000) \$(4,845,000) \$(24,050,000) \$(1,650,000) 1 \$(233,318) \$(583,296) \$465,263 \$661,105 \$4,374,354 \$- 2 \$525,358 \$1,260,859 \$766,303 \$831,781 \$3,146,041 \$- 3 \$480,408 \$1,104,938 \$725

### PM for LRH Products: Determining Budgets for Individual Tasks

PROBLEM: As project manager, you have been given an overall budget for the trade show project, but you need to refine it (FYI: You have adequate budget, which was prepared by the marketing manager based on the costs from the last show). 1) Consider various ways to determine budgets for the individual tasks. 2) What are the

### IRR, financial leverage, Leverage, BEP, Profitability Index, NPV-Finance Problems

1. Discuss the limitations of financial leverage. 2. The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph stamped on. Each bat sells for \$13 and has a variable cost of \$8. There is \$20,000 in fixed costs involved in the production process. a. Compute the break-even point in units. b.

### Capital budgeting

The Woodruff Corporation purchased a piece of equipment three years ago for \$230,000.It has an asset depreciation range(ADR) midpoint of eight years.The old equipment can be sold for \$90,000. A new piece of equipment can be purchased for \$320,000.It also has an ADR of 8 years. Assume the old and new equipment would provide

### Capital budgeting - relevant cash flows

I saw almost the same Question in the solution library but it only had brief answers, no formulas, explanations, etc. I'd love some nice walking through with this one, if you will :) Graphic Systems purchased a computerized measuring device two years ago for \$80,000.It falls into the five year category for MACRS depreciation.

### Master Budget: Understanding the budget preparation process and the use of budgets

In a fast growing company, does an increase in the company's sales necessarily imply an increase on the expense side as well? Explain please. How can organizations increase the accuracy of the budgeting process? How are long-term capital expenditures budgeted in a quarterly budgeting process? Are cash budgets impli

### the relevance and importance of capital budgeting process

Please explain the relevance and importance of the capital budgeting process. In your response, please explain why we should still forecast even though business conditions are always changing.

### 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: Compute expected return, standard deviation, covariance, proforma

See the attached Excel file. Betsy Cotner went to work for a title company after graduation from college. The department she worked in provided disbursement advice to banks with regard to oil/gas-related loans. When a bank granted a construction loan, the money was paid out according to progress made. Someone had to monitor