Capital Budgeting Decisions Equity Corp. paid a consultant to study the desirability of installing some new equipment. The consultant recently submitted the following analysis: Cost of new machine $100,000 Present value of after-tax revenues from operation 90,000 Present value of after-tax operating expenses 20,0
Final decision will hinge on the reliability of the estimates; however, not all decisions are purely quantitative. What qualitative elements should you consider as you begin to formulate your decision on The UPS Store franchise opportunity? Consider the following: In decision-making scenarios, risk pertains to known factors
After meeting with the VP of Accounting, you believe you need to get a better understanding of the plant construction project. You call the financial analyst working on the project and ask that she bring the financials to you to discuss the valuation methodologies. Meeting with the financial analyst, discuss three key valuation
Exercise 1. You are the new chief financial officer (CFO) hired by a company. The chief executive officer (CEO) indicates that in the past, there was little rhyme or reason for the prior CFO to approve or disapprove of large capital projects or investments that various managers proposed. You mentioned to the CEO that there are
In your own words, explain capital budgeting. Why is it important to a company's long-term success? Provide an example of poorly performed capital budgeting. How does this affect a company's long-term success? Why is capital budgeting part of a company's long-term strategic planning process? What are the pros and cons of the
HR: Why is it that so many potential and present employees are unfamiliar with the benefit plan offered by an organization?
Why is it that so many potential and present employees are unfamiliar with the benefit plan offered by an organization?
Distinguish between rational approaches and incremental approaches budgeting. What are the challenges of state and local budgeting.
Analyze the role of project management in creating and maintaining facility assets. I only have to address the following topic. Define critical phases of a project.
Finance: NPV of project, IRR of project, payback, year 1 cash flow, opportunity cost, net working capital
5. Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. WACC: 9.00%Year 0 1 2 3 Cash flows -$1,000 $500 $500 $500 A) $265.65 B) $278.93 C) $292.88 D) $307.52 E) $322.90 6. Simms Corp.
Please see attached file for proper format. Mary Janane's capital statement reveals that her drawings during the year were $50,000. She made an additional capital investment of $25,000 and her share of the net loss for the year was $10,000. Her ending capital balance was $200,000. What was Mary Janane's beginning capital bala
Managerial Accounting: Longfellow accounting equation, accept project, payback period, direct materials used, acceptable investment
Longfellow Company experienced an accounting event that affected its financial statements as indicated below: Which of the following transactions could have caused the indicated effects on the company's accounting equation? Assets (250) = Liab n/a + Equity (250) Rev n/a - Exp 250 = Net Inc (250) a. Goods transferred from
Mangerial Accounting: Minimum cash flow for acceptable investment, present value index, net income under absorption costing, annuity
1. Crown Company is considering purchase of equipment that costs $60,000. If the useful life is expected to be 5 years and Crown's required rate of return is 10%, what is the minimum annual cash inflow that the equipment must offer for the investment to be acceptable? 2. An investment that costs $5,000 will produce annual
The Golf Range is considering adding an additional driving range to its facility. The range would cost $76,000, would be depreciated on a straight line basis over its 7-year life, and would have a zero salvage value. The anticipated income from the project is $34,000 a year with $14,400 of that amount being variable cost. The fi
See attached file: Please use the APA format in writing these papers (well-organized). (APA Rules attached), the APA rules for formatting, quoting, paraphrasing, citing, and listing of sources are to be followed. Obtain a copy of an agency's budget and the agency's mission statement. Keeping in mind the mission and researc
For a project to create firm value, the project cash flows must exceed the investment in into the project plus a return for the use of capital. Discuss how: The discounted cash flow analysis then discounts project investments and project cash inflows at the firm's cost of capital. A positive NPV project then adds firm
Which one of the following is TRUE? Answer IRR is superior to NPV for choosing between different projects. The NPV decision rule says to accept an investment if the NPV is negative. Payback ignores the project s cost. The IRR decision rule states that a project should be accepted if its IRR exceeds the required return. The
Which one of the following is FALSE for a project whose NPV equals zero? Answer The project earns more than the required return. The projects cash outflows are equal to the present value of the cash inflows. The project will have no impact on firm value. The IRR is equal to the required rate of return "Your company is
Capital Budgeting is a decision making and control tool with a primary focus on projects and investments whose impact is over a period of time.
A non-profit organization believes it can save $28,000 a year in cash operating costs for the next 10 years with the purchase of a custom-made machine that costs $110,000. This machine is expected to have a zero disposal value. The organization's rate of returns is 14%. 1. Explain and compute the payback period 2. Explain and
A manager of Olympic Mutual Funds is contemplating acquiring servers to operate its Website. The servers will cost $660,000 cash and will have zero terminal salvage value. The recovery period and useful life are both 3 years. Annual pretax cash savings from operations will be $300,000. The income tax rate is 40%, and the requir
XYZ company's investment budget and dividend payout plan for next year. a. XYZ expects next year's income after-tax to be $28,000,000. b. Earnings and dividends are growing at a constant rate of 10% per year. c. Last year's dividends was $2.73, d. Current stock price is $40.00 e. Cost of new debt is 12% f. XYZ's optima
Janes, Inc. is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000. The machine would reduce labor and other costs by $109,000 per year. Additional working capital of $4,000 would be needed immediately, all of which woul
The manufacturing department of Holmes Manufacturing Company must choose from six capital budgeting proposals outlined below. The department is subject to capital rationing and it has a budget ceiling of 1,000,000. The company's cost of capital is 15%. Using the criteria of IRR and NPV below, which projects should the department
I have a company that has a 8 year project life. The project requires an initial investment of $300 million to construct building and purchase equipment, and $20 million for shipping & installation fee. The fixed assets fall in the 7-year MACRS class. Salvage value of the fixed assets is $15 million. The number of units of the n
See attached file. Dunder-Mifflin, Inc is analyzing the potential profitability of three printing jobs put up for bid by the State Department of Revenue: 1. the company's marginal city plus state plus federal tax rate is 50% 2. each job is expected to have a 6 yr. life 3. firm uses straight line depreciation 4. the ave
Imagine that you are a senior manager of a company operating in Hong Kong in a highly innovative and competitive market with an annual turnover of US $500,000,000 and that you have a first draft of what can be a good business opportunity with an estimated investment (sunk) cost of US $50,000,000. Your intuition is that it mi
Bodin Company budgets on an annual basis. The following beginning and ending inventory levels (in units) are planned for the year 20x1. Two units of raw material are required to produce each unit of finished product. January 1 December 31 Raw material 35,000 45,000 Work in process 12,000 12,000
There are three questions attached here. The following is question three. QUESTION 3 Assume that Alnser Company has a project under consideration that requires an initial investment of 1,000,000 QR and will produce incremental after tax cash flows of 350,00 annually for five years. Alnser company decides to get the money f
See attached file for proper format of the tables. 1) Many firms use the weighted average cost of capital for the firm as the hurdle rate when comparing to IRR or as the discount rate in an NPV calculation. However, there is an implicit assumption being made when one does that. What problems can one encounter or what erro
See attached Excel file for proper format. Case New Heritage Doll Company Wk 4 is the second of two weeks on CAPITAL BUDGETING. Study the Wk 3 Solutions Template before proceeding into Wk 4. Learning Objectives You will learn the three steps in capital budgeting: basics ac
Veronica Tanner, the president of Tanner Enterprises, is considering two investment opportunities. Because of limited resources, she will be able to invest in only one for them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage valu