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Net Present Value (NPV)

Accurate of Net Present Value Calculation

How accurate do you think a company's estimates of the net present value of a proposed project are? Refer to both the initial investment and to the components of the cash flow: revenues, operating expenses, depreciation, taxes, and the cost of capital to use for the computation of the present value. Keep in mind that NPV is t

Developing a Pro Forma to Assist You in Your Valuation

An entrepreneur develops a business plan that requires an initial investment of $2,200 million with a further investment of $2,200 million each year on an ongoing basis. Investment is expected to yield sales revenue equal to 70 percent of the investment in each of the two years following the investment. Accounting rules require

Return on Investment, Interest Expense, Depreciation Expense, NPV

On January 1, 2006 Drummond Company purchased an asset that had cost $26,000. The asset had a 6-year useful life and an estimated salvage value of $2,000. Drummond depreciates its assets on the straight-line basis. On January 1, 2009 the company spent $12,000 to improve the quality of the asset. Based on this information the rec

Net Present Value Analysis (

I need help analyzing the NPV by creating an Excel spreadsheet, using the details below Thanks for your effort. ------------ PROJECT 3 - Net Present Value Analysis - Rev 1 is a (fictitious) profitable Internet-based company selling high-end fine leather furniture. The company is considering expanding

Capital budgeting - NPV

Your company wants to develop a new product. To date, your company has invested about $4 million in development of the new product. If you choose to pursue the project, it will require an investment of $3 million today and an additional $2 million next year (one year from today). The $3 million is for labor and is immediately ta

Helping the CFO analyze net present value

____ 8. After taking into account all of the relevant cash flows from the previous question, the company's CFO has estimated the project's NPV and has also put together the following scenario analysis: Scenario Prob. of Scenario Occurring Expected NPV County taxes increased 25%

Management Information System Case Analysis as consultant

Dear, Find below the Consumer Products International case. Also enclosed the required "presentation format" and sequence of analysis for the team to follow in developing the presentation. Most important element that the presentation should be constructed as a"Consultant team" whom they are conducting this analysis for the

Net Present Value for the American Book

American Book and Periodical (ABP) is considering an old proposal to put coffee shops in each store for which they paid an outside firm $1 million to design a standardized facility that could go in each of their 1,200 stores. A national coffee house chain would pay for the installation cost of $250,000 per store and operate thes

Intermediate Financial Accounting Study Guide

1. Some of the irregular items found in the income statement may include: a. Discontinued operations, extraordinary items, changes in accounting principles. b. Discontinued operations, operating expenses and assets. c. Extraordinary items, changes in estimates, and liabilities. d. Changes in cash flows, changes in assets

Parley Oram: NPV and Payback Period. Which is best to evaluate two alternatives?

Parley Oram saved $200,000 during the 25 years that he worked for a major corporation. Now he has retired at the age of 50 and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportun

Project Evaluation - Cash Flows, IFF, NPV & IRR

Project Evaluation Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a seven-ye

Bauer Industries : Analyzing a cost of capital project (NPV and sensitivity )

Bauer Industries is an automobile manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. Bauer plans to use a cost capital of 12% to evaluate this project. Based on the extensive research, it has prepared the following incremental free cash flow projections (in mill

35 MQ questions: legal form, TVM concepts, NPV, financial analysis

1. The primary advantage of the proprietor form of business over the corporate form is: a. ease of raising capital (money) b. avoidance of double taxation c. unlimited life d. limited liability 2. All of the following are characteristics of proprietorships except: a. ease of formation b. income treated as part of

Managerial Accounting. Multiple Questions

Ref: Fundamental Managerial Accounting Concepts. Fifth Edition. EDMONDS Multiple Questions such as: If a company misclassifies a general, selling and administrative cost as a product cost in a period when production exceeds sales A) net income will be understated. B) total assets will be understated. C) cash flow will be

Free Cash Flow, Net Present Value, Internal Rate of Return

Problem 1 TCM Petroleum is an integrated oil company headquartered in Fort Worth, Texas. The following are the information on its income statements for 2007 and 2008 (all dollar figures are in millions): 2007 Sales: $12,200.00, cost of goods sold: 72% of sales, depreciation: $850.00, additional CAPEX: $900.00, addition

Account classification; Income Statement; NPV; and Ratios

4-50. Using the format provided, for each account identify (1) whether the account is a balance sheet (B/S) or an income statement (I/S) account; (2) whether it is an asset (A), a liability (L), an owners' equity (OE), a revenue (R), or an expense (E) account; (3) whether the account is real or a nominal account; (4) whether the

Decision Tree Analysis for Roper Fashions

Roper fashions is preparing a product strategy for the fall season. One option is to go to a highly imaginative new, four-gold-button sport coat with special emblems on the front pocket. The all-wool product would be for both males and females. A second option would be to produce a traditional blue blazer line. The marketing res

Problem set

A8. A firm can issue an eight-year public debt issue at par with an 11% coupon in the domestic market. It can also issue 11.25% Eurobonds. If all other expenses are equal, which issue offer the firm the lower borrowing cost? A3.A firm is considering leasing a computer system that costs $1,000,000 new. The lease requires an

Present Value Finance

1. Your company is considering construction project. There is a payment due right now of $50,000. Another progress payment is due in one year of $100,000 and a final payment is due of $200,000 after two years. When it is done in two years it should be able to be sold for $500,000. What is the present value of the profit on t

Question about NPV

Creighton Industries is considering the purchase of a new strapping machine, which will cost $120,000, plus an additional $7,500 to ship and install. The new machine will have a 5-year useful life and will be depreciated to zero using the straight-line method. The machine is expected to generate new sales of $25,000 per year and

Cost of a Warehouse Facility

In response to increasing competition, a major paper distributor in the Washington metropolitan area with headquarters in Cheverly, Maryland wants to expand its presence along the east coast. The objective is to have one warehouse facility in a major metropolitan area in Virginia, North Carolina, South Carolina and Georgia. The

Finance problems: IRR and NPV.

Troy Fin 3332 Semester Project The Project is to be completed off line but answered utilizing the quiz format. Online course contains questions matching those on the various sheets in this workbook. Workbooks/ spreadsheets are not to be e-mailed, unless requested. Click on each worksheet below.

Bayshore Company Manufactures and Sells Product K

Bayshore Company manufactures and sells Product K. Results for last year are as follows: Sales (10,000 units at $150 each) $1,500,000 Less expenses: Variable production costs $900,000 Sales commissions (15% of sales) 225,000 Salary of product line manager 190,000 Traceable fixed advertising expense 175,

Cash flows and NPV for a replacement decision

Andrew Thompson Interests (ATI) is using a mechanical switching system that it bought five years ago for $400,000. This mechanical system is being depreciated straight line to an estimated salvage value of zero over a 10-year life. Thus, the annual depreciation charge is $40,000 and current book value is $200,000. At the end of

Cash flows and NPV for a new project

Syracuse Road building Company is considering the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional $5,000 is needed to paint it with the firm logo and install radio equipment. Assume the truck falls into the MACRS three-year class. The truck will generate no additional revenues, but it will red

Compound Interest and NPV

3 short calculations 1. Johnny deposited $2,000 in a bank account that pays 12% interest annually. What will the dollar amount be in four years? 2. If Johnny wants to have $1,700 in seven years, how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded q