Explore BrainMass

Capital Budgeting

Brief Summary on the Concept of Capital Budgeting

This is an introduction to Capital Budgeting. It introduces five types of capital budgeting techniques used to evaluate proposed investments. You'll find definitions for Net Present Value(NPV), Internal Rate of Return(IRR), Profitability Index(PI), Payback Period, and Accounting Rate of Return(ARR). This solution will also

Capital budgeting is examined.

Why is a capital budget request always an issue within an organization? How might a manager align those requests with the overall needs of the organization?

Question about Capital Budgeting Process

1. Discuss how an organization would determine the total value to be allocated towards capital projects. 2. Discuss the key factors that would determine if a project should be approved in a capital budgeting process. 3. After a capital project has been approved and completed, discuss how you would assess whether or not the pro

Finance Computations: Example Problems

1) A project costs $100,000 and yields annual cash flows of $40,000 for 5 years. The required rate of return is 6%. Compute the following: a. NPV b. Internal rate of return (IRR) c. Payback period d. Is the project acceptable? Why or why not? 2) What two problems are involved with the payback period?

Three Rivers Company new computer system: Calculate NPV, payback, IRR

Three Rivers Company runs clothing stores in the Pittsburgh 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%. I

TopCap Co. - net present value of the proposed investment

Chapter 16 Problem 16.26 Problem Description: TopCap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $208,000. In addition, delivery and installation costs will total $10,000. The machine has the

Netflix and Blockbuster Financial Data

Visit the Netflix and Blockbuster Financial Data handout to weigh the benefits of an investment with each company. Consider a scenario where you have $10 million to invest and are considering investing in Netflix or Blockbuster equity (or both). In the context of this investment scenario address the following questions: Dev

Capital Budgeting Decisions

Evaluate several capital budgeting decision scenarios. In a Word document, complete the exercises below Equity Corp. Equity Corp. paid a consultant to study the desirability of installing some new equipment. The consultant recently submitted the following analysis:

DCF and NPV method

Can you help me get started with this project? Describe how you would use a Discounted Cash Flow and Net Present Value accounting method to make a decision in your business or profession. a. Describe the DCF and NPV methods (what they are and how they can be used) b. Write a short story about a sample company who would

Project cash flow, NPV, IRR

A not for profit business is evaluating the purchase of new diagnostic equipment. The equipment, which costs $600,000, has an expected life of five years and an estimated salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year for each year of the projects l

Finance and Budgeting In Education: Virginia Tech Polytechnic Univ

1. Use the Internet to research the current state of the economy and how it is affecting higher education institutions. What evidence can you find that colleges and universities are addressing financial problems through the process of retrenchment? Provide your sources of information. Use examples from your own experience if

CFO at a local hospital - payback, NPV, and IRR

Assume you are the CFO at a local hospital. The CEO has asked you to analyze two proposed capital investments - Project X and Project Y. Each requires a net investment outlay of $10,000 and the opportunity cost of capital for each project is 12%. The projects' expected net cash flows are as follows: Year Pro

Criminal Justice Integration Project and Presentation

Criminal Justice Integration Project and Presentation Identify, describe, and explain the following issues: - Budgets: projected revenue sources and expenditures Include an integration plan to improve interactions between law enforcement, private security, the courts, and institutional and community corrections over t

Finance: Define IRR, payback method, ROI with 6.0% WACC

1. What is meant by a company's "internal rate of return" and why is it important to use as a metric? What do some of the websites ( i.e. Zenwealth, Investopedia and Wikipedia) say about IRR? 2. What are the strengths and weaknesses of the payback method of ranking project proposals as compared to other methods? What method

Most Desirable and Least Desirable Project

Chris's Custom Manufacturing Company is considering three new projects, each requiring an equipment investment of $24,380. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $9,072 $11,816 $14,672 2 11,648 11,816 11,312 3 16,912 11,816 12,432 Total $37,

Capital Budgeting Process: allocation of value, key factors, financial return

1. Discuss how an organization would determine the total value to be allocated towards capital projects. 2. Discuss the key factors that would determine if a project should be approved in a capital budgeting process. 3. After a capital project has been approved and completed, discuss how you would assess whether or not t

Capital Budgeting of a New Product.

Your company has spent $200,000 on research to develop a new product. The firm is planning to spend $300,000 on a machine to produce the product. Shipping and installation costs of the machine will be capitalized and depreciated; they total $25,000. The machine has an expected life of 3 years, a $50,000 estimated resale value, a

Basic Capital Budgeting

1) Which are the following are correct: --one drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback. --one drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period. -

Capital Budgeting

Which are the following are valid conclusions of capital budgeting? one of more can apply. 1) Managers have been slow to adopt the IRR because percentage returns are a harder concept to them to grasp? 2)The discounted payback period improves on the regular payback period by accounting for the time value of money. 3) For

cost of stock/DCF

1) xyz stock currently trades at $45.50 per share. At the end of year, xyz is expected to pay annual dividend of $3.65 per share and the firm's dividend is expected to grow at a constant rate of 4% per year. What is the firm's cost of retained earnings? 2)If xyz were to issue new common stock, the new shares could be sold at

Calculate NPV and PI for the given proposal.

The Philadelphia Phillies are interested in building a new stadium. The most cost-effective method of building the stadium is to fund it through ticket sales. To go ahead with this development, the Phillies must spend $ 100,000 for a land survey, $ 100,000 for building permits and $ 10,000,000 for its installation. The stadiu

Return on Equity

You know that when expanding and investing in projects overseas as Acme plans to, it is essential to understand such things as return on equity (ROE) and internal rate of return (IRR). Using Internet sources (you may want to start with the websites listed below) gather information on ROE and IRR. Post a two to three paragraph ex

Calculate the internal rate of return of the investment opportunity.

Joel Hodge, CFO of Kleiser Enterprises, is evaluating an opportunity to invest in additional manufacturing equipment that will enable the company to increase its net cash inflows by $600,000 per year. The equipment costs $1,794,367.20. It is expected to have a five-year useful life and a zero salvage value. Kleiser's cost of cap

Capital Budgeting Project for ChangePoint Proposal to SightScan

Please see attached file for more data and provide your explanation in the Excel file. The benefits of the ERP project begin when the system is put into operation. After the initial investment, the following benefits are expected over a 5 year period: reduced inventory costs ($105,000), and reduced administrative costs ($9

NPV IRR Calculations

Please view attachment for question. a. Calculate the NPV, IRR, Profitability Index, and MIRR for this project with a cost of capital of 12%. (see attached) b.For a single conventional project, the NPV and IRR will agree on whether to invest or to not invest. However, in the case of two mutually exclusive projects, th

Clark Paints Proposal

Clark Paints: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the paint cans instead of purchasing them. The equipment needed would cost $200,000, with a disposal value of $40,000, and it would be able to produce 5,500,000 cans ove

NPV and ANPV decisions

Richard and Linda Butler decide that it is time to purchase a high-definition (HD) television because the technology has improved and prices have fallen over the past 3 years. From their research, they narrow their choices to two sets, the Samsung 42-inches LCD with 1080p capability and the Sony 42-inches LCD with 1080p feature