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Capital Budgeting

Clarification of Net Present Value (NPV)

It appears that NPV or net present value is the best method because it takes into account the initial financial outlay, and brings the future projections back to the present day's value to figure out which is worth pursuing in the long run. Entrepreneurs take many risks, but of course, most wish to take the most calculated risks

Failing Businesses: Pledging

Pledging seems like a last chance effort to save your business. Shouldn't a business owner really consider profit margins before using this technique? What is the point if at the end of the month, the 10% that is paid out gives you a negative profit margin?

Cost of Capital and Net Present Value (NPV)

I have a few problems to work on for my practice class. Please show me your steps to the solution/formulas use. Thank you. Problem #1 The market value of Charcoal Corporation's common stock is 20 million, and the market value of its risk-free debt is $5 million. The beta of the company's common stock is 1.25, and the

Present Value and Capital Budgeting

Calculating present value. A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? B. Suppose you have two bank acco

Corporate Finance Project

A) Would the projects that have a higher IRR pose greater risk over time? How does the IRR play a role in the risk assessment of a particular project? B)With respect to those projects with higher individual IRR's, how does this impact the outcome of their financing decisions? What is the relationship of risk associated with

firm's Break-even Point

Sales (100 units) $200 Variable costs ($.80 ea) 80 Fixed Costs 20 EBIT 100 Interest Expense 30 EBT 70 Incom


A project has an initial cost of $65,000, expected cash flows of $14,000 per year for 9 years and a cost of capital of 11%. Answer the following: a. What is the IRR? b. What is the payback period? c. What is the NPV?

Budgeting for Unit Purchases

Not sure which method to use to work out the following problem: Nano, Inc. is preparing its budget for the second quarter. The following sales data have been forecasted: April May June July August Unit Sales ............ 640 720 780 620 680 Additional Info


1. Prefer a centralized or decentralized approach to budgeting, why? 2. What is meant by bottom-up or top-down with regard to budgeting?

Capital Budgeting

I need help getting started with the following: The management at William's Pharmaceutical is considering new computers and equipment to manage inventory and to expedite online orders and product shipment. The investment will be $100,000 and the cost of capital is 15%. The company earned $500,000 in sales last year and antici

Capital Budgeting and Risk Refinement

Please write your answers on a WORD or PDF. 1) Tangshan Mining Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to have an initial after tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500

Capital Budgeting Question

Projected cash flows for the proposed Solar Energy ("SE") Project, with a four-year life, are: 1. Initial expenditure of $100,000 now. 2. Projected cash inflow of $40,000 at end-of-each-of-next-three-years. 3. Projected cash inflow of $140,000 at end-of-fourth-year. Key inputs for three of the different capital

Break-Even for Sam's Pizza

Sam's Pizza is considering a new store location. For accounting purposes, fixed operating costs for a store are $185,000 a year, and variable costs are 36 percent of sales. The average pizza sells for $11. Compute the annual break-even sales level in number of pizzas for this store location.

Determining Net Present Value of the Proposed Investment

The following data pertain to an investment that is being considered by the management of SublexCompany: - Discount rate: 10% - Life of the project: 5 years - Cost of the investment: $56,865 - Annual cost savings: 15,000 - Estimated salvage value: 3,000 What is the net present value of the proposed investment?

Capital Budgeting Issue

An investment of $30,000 will be depreciated straight line for 10 years down to a zero salvage value. For its 10-year life, the investment will generate annual sales of $12,000 and annual cash operating expenses of $2,000. Although the investment is depreciated to a zero book value, it should sell for $3,000 in 10 years. The mar

The link between capital structure and capital budgeting

Fiera Corporation is evaluating a new project that cost $45,000. The project will be financed using 40% debt and 60% equity, thus maintaining the firm's current debt-to-equity ratio. The firm's stockholders have a required rate of return of 18.36%, and it bold holders expect a 10.68% rate of return. The project is expected to ge

Calculating payback period

Please find attached questions and also corresponding excel formula shells to match the answers to. Thanks

Replacement Analysis

The Everly Equipment Company purchased a machine 5 years ago at a cost of $90,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $9,000 per year. If the machine is not replaced, it can be sold for $10,000 at the end of its useful life. A new ma

Prob. 11-B2 Oncology department of FH Research Center: NPV investment decisions.

NPV for investment decisions The head of the Oncology department of FH Research Center is considering the purchase of some new equipment. The cost is $420,000, the economic life is 5 years, and there is no terminal disposal value. Annual cash inflows from operations would increase by $140,000 and the required rate of return i

npv vs IRR

When using the IRR approach, when can the internal rate of return be determined simply by dividing the initial outlay by the cash flows? Will a decision that is based on NPV ever change if it were based on IRR instead? Why or why not?

Corporate Finance Foundations

1.1 Discuss 12 principles of foundational corporate finance. 1.2 Compare and contrast accounting net income and cash flows. 1.3 Compare and contrast the market value of an asset or liability from the book value. Question: With respect to those projects with higher individual IRR's, how does this impact the outcome of th

Capital Budgeting Average Risks

COMPREHENSIVE CAPITAL BUDGETING BALANCE SHEET Cash 2,000,000 Accounts Payable and Accruals 18,000,000 Accounts Receivable 28,000,000 Notes Payable 40,000,000 Inventories 42,000,000 Long-Term Debt 60,000,000 Preferred Stock 10,000,000 Net Fixed Assets 133,000,000 Common Equity 77,000,000 Total Assets 205,000,0

Net Present Value

You are put in charge of replacing the fleet of sales and executive automobiles for your company. Three types of cars have been identified. The first type would cost less upfront, have higher maintenance cost, and lower salvage values after shorter lives. The second type would cost a little more upfront, have slightly lower main

Valuate investment opportunities utilizing capital budgeting tools

Strategic decision makers are required to be able to evaluate projects based on the long-term objectives of the firm as well as the project's ability to earn the company additional compensation. The 3 main tools used to make this evaluation are the pay-back period, net present value (NPV), and internal rate of return (IRR). Ye