Explore BrainMass

Capital 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

Cost Accounting

Three Rivers Company runs clothing stores in the Pittsburg area. Three Rivers' management estimates that if it invests $250,000 in a new computer system, it can save $75,000 in annual cash operating costs. The system has an expected useful life of ten years and no terminal Disposal value. The required rate of return is 8%. Ignor

Cost Accounting

Three Rivers Company runs clothing stores in the Pittsburg area. Three Rivers' management estimates that if it invests $250,000 in a new computer system, it can save $75,000 in annual cash operating costs. The system has an expected useful life of ten years and no terminal Disposal value. The required rate of return is 8%. Igno

Cost of Capital, Capital Structure, and Capital Budgeting Analysis

Purpose of the project: In this project, you are supposed to be a financial manager who determines the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital (WACC) for a Phizer (PFE). You will use the estimated WACC as the discount rate to conduct capital budge

Payback and Return

Study the information below and answer the following questions: 1.1.1 Calculate the payback period for project B (answers expressed in years, months and days). (3) 1.1.2 Calculate the accounting rate of return (on average investment) for each project. (4) 1.1.3 Calculate the net present value for each project. (6) 1.1.4 Ba

ALLIED FOOD PRODUCTS: Capital Budgeting and Cash Flow Estimation

ALLIED FOOD PRODUCTS: Capital Budgeting and Cash Flow Estimation After seeing Snapple's success with non-cola soft drinks and learning of Coke's and Pepsi's interest, Allied Food Products has decided to consider an expansion of its own in the fruit juice business. The product being considered is fresh lemon juice. Assume t

Budgets and Policies

Budgets are plans of action based on forecasted transactions, activities, and events that are synonymous with managing an organization. They are essential to accomplishing the goals articulated in an organization's strategic plan and are used to communicate information, coordinate activities and resource usage, motivate employee


Look at the net present value (NPV) equation (11-1) in your text Fundamentals of Financial Management and the cash flow time line below the formula. In your own words, explain each term of the NPV equation. Explain how you would arrive at the discounted cash flows for each year represented within the time line. How does this cal

Net Present Value, Equity Multiplier, Expected Return

(1) What is the net present value of a project with the following cash flows if the required rate of return is 15 percent? Year Cash Flow 0 -$42,398 1 13,407 2 21,219 3 17,800 (2) A firm has a debt-to-equity ratio of 0.5. What is the firm's equity multiplier? (3) Microsoft's beta is 1. The risk free rate of return is 2%.

NPV Project Investments

NPV or IRR investment decision process, why include manager intuition? $1 Million NPV project, what does this mean? For what kinds of investments would terminal value account for a substantial fraction of the total project NPV, and for what kinds of investments would terminal value be relatively unimportant? Suppose an