Purchase Solution

Capital Budgeting: Cash Flow

Not what you're looking for?

Ask Custom Question

1) PROPER CASH FLOWS: Quick computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forcasts annual sales of 12 million of these improved chips at a price of $25 each. However, demand for the old chip will decrease and sales of the old chip are expected to fall to 3 million per year. The old chip costs $6 each tomanufacture and the new ones will costs $8 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip?

2) INCREMENTAL CASH FLOWS: A corporation donates a valuable painting from its private collection to an art museum. Which of the following are incremental cash flows associated with the donation?

a. The price the firm paid for the painting.
b. The current market value of the painting.
c. The deduction from income tax that it declares for its charitable gift.
d. The reduction in taxes due to its declared tax deduction.

Purchase this Solution
Solution Summary

The solution
1) calculates cash flows for evaluating the present value of the introduction of the new chip
2) indicates incremental cash flows associated with the donation of a valuable painting from the private collection of a corporation to an art museum.

Purchase this Solution
Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

View More Free Quizzes
Related BrainMass Solutions

  • Capital Budgeting Decision: Terminal Cash Flow

    35076 Capital Budgeting Decision: Terminal Cash Flow A corporation is evaluating the relevant cash flow for a capital budgeting decision and must estimate cash flow.

  • Depreciation and capital budgeting

    332869 Depreciation and capital budgeting In capital budgeting analysis, a proposed project is typically evaluated based on cash flows.

  • Operating Cash Flows

    The solutions to other problems are in the attachment titles Soln.xls Operating cash flow accounting profits are determined. The solution focuses on cash flows as opposed to net income in capital budgeting.

  • Capital Budgeting Three-Part Process

    CASH FLOWS AND CAPITAL BUDGETING Capital budgeting decisions really depend much on estimated cash flows relevant to a project.

  • Capital budgeting decisions

    b) technology may change rendering the product obsolete (reduced expected life of project) c) competition may alter demand and therefore the assumptions of cash flow for the project (reduce expectation of cash flow) The solution discusses why capital

  • Capital Budgeting Purposes

    The greater the inflation, the greater the difference in value between a cash flow today and the same cash flow in the future.

  • Incremental cash flow-capital budgeting

    275886 Which does not produce incremental cash flow: not part of capital budgeting decision Which one of the following does NOT have incremental cash flow effects and thus should not be considered in a capital budgeting decision for a new project?

  • Problem with valuing mutually exclusive projects using DCF

    201524 Problem with valuing mutually exclusive projects using DCF capital-budgeting criteria. Why might the existence of mutually exclusive projects cause problems in the implementation of the discounted cash flow capital-budgeting criteria?

  • Capital budgeting Cash flow

    462381 Capital budgeting Cash flow ABC company is evaluating its first year operating cash flows (at t=1).

  • Concept of Risk in the Capital Budgeting Process

    For each cash flow a range of values can be developed around the estimate (most likely) - from worst case to best case.

View More Related Solutions