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    Capital Budgeting

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    Calculating the present value.

    Suppose you retire at age 70, with a life expectancy of 20 more years, and you expect to spend $55,000 a year during your retirement. How much money do you need to save by age 70 to support this consumption plan? Assume an interest rate of 7%.

    Calculate optimal facility expansion using a tree diagram.

    A firm that plans to expand its product line must decide whether to build a small or large facility to produce the new products. If it builds a small facility and demand is low, the net present value after deducting for building costs will be $400,000. If demand is high, the firm can either maintain the small facility or expand

    10 Corporate Finance Questions on Corporate Finance that discuss issues like Cost of Capital, Credit Policy, Working Capital Financing, Dividend payments, Capital Structure, Impact of write off of non performing assets

    1. A company has a debt ratio greater than the industry average. How would an investor evaluate the implications of this higher debt ratio in making an investment decision in this company's common stock? 2. In your opinion, what are the major factors determining the kind of financing for working capital a company can secure?

    Capital budgeting Process: WACC, payback, NPV, risk, ROA

    1. Why would a manager use the Weighted Cost of Capital for investment decisions when a specific project may be funded by a particular source of capital, (e.g. debt or equity)? 2. What capital budgeting process and evaluation does your organization (or one you can talk to) use? Specifically what Pay Back Period and NPV di

    Pappy's Potato: Project Cash Flows, calculate payback period, NPV, and IRR

    Pappy's Potato has come pu with a new product, the Pet Potato (they are freeze-dried to last longer). Pappy's paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Pet Potato will generate sales of $270,000 per year. The fixed costs associated with this will be $115,000 per year, and

    Bedknobs and Broomsticks: Two projects. What is IRR, NPV for each?

    Bedknobs and Broomsticks, Inc., has the following two projects available. The required return is 14% PLEASE SEE ATTACHED SPREADSHEET a) What is the IRR for each project? b) What is the NPV for each project? c) Which, if either, of these two projects should the company choose?

    B. C. Rogers: Profitability, NPV, Required Return

    B.C. Rogers, Inc., is presented with the following two mutually exclusive projects. The required return is 15%. PLEASE SEE ATTACHED SPREADSHEET FOR FIGURES. a) What is the profitability index for each project? b) What is the NPV for each project? c) Which, if either, of the projects should the company choose? 8-25

    Comparing investment criteria: payback, NPV, IRR, profitability index

    Consider the following two mutually exclusive projects: (Please see attached spreadsheet for info.) Whichever project you choose, if any, you require a 15% return on your investment. a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the NPV criterion, which investment will y

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