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
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
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 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.
Clegg is replacing one of his machines. He can choose between machine A or machine B. Details of the machines are as follows... Please see attached. Required: a) Calculate the accounting rate of return (ARR) for each machine. b) Calculate the payback period for each machine. c) Calculate the net present value (NPV) of
Explain how the concept of risk can be incorporated into the capital budgeting process.
Please see attached.
14. The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $45,000. The annual cash flows have the following projections: Year Cash Flow 1 . . . . . . . . . . $15,000 2 . . . . . . . . . . 20,000 3 . . . . . . . . .
I am having problems answering question "a" (comuting NPV of cashflow using 7% discount rate), and question "b" (computing Year 5 NPV using a 7% discount rate). Also not sure if the the business should be a LLC or a corporation. See attached for details.
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
Financial Management Assignment 2003/2004 Semester 2 Quinn Limited is a private family owned company, established in the late 1960's by Tom Quinn, who is the current managing director and 60% shareholder. Since incorporation the company has manufactured plastic trays and cups used on aeroplanes for passenger meals. Until the
Cleug is replacing one of his machines. He can choose between machine A or machine B. Details of the machine are as follows... Estimated receipts and payments are as follows... Required: a) Calculate the accounting rate of return (ARR) for each machine. [12] b) Calculate the payback period for each machine. [4] c) Cal
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
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
See the attached file. 'Using the GEICO dividend Payment history in Exhibit 8 of the case, calculate the IRR on Berkshire's $45.7M investment in GEICO (assuming it was all)in 1976 which grew in value to $1.909 billion by 1994.' I'd like a detailed explanation of how to make the calculation with an example using very simila
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
Describe briefly what advantages there would be for a firm if it adopts a system of flexible budgeting.
Company A has a capital structure that consists of 20% equity and 80% debt. The Company expects to report 3 million in net income this year and 60% of the net income will be paid out as dividends. How large must the firm's capital budget be this year without it having to issue any new common stock and why? 1.2M? 13M? 1.5
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