Explore BrainMass

Net Present Value (NPV)

Accounting problem

Kingsley Products, Ltd., is using a model 400 shaping machine to make one of its products. The company is expecting to have a large increase in demand for the product and is anxious to expand its productive capacity. Two possibilities are under consideration: Alternative 1. Purchase another model 400 shaping machine to operat

NVP and Cost of Equity for Wheel Industries and Clinton Co.

1. Wheel Industries is considering a three year expansion project. The project requires an initial investment of $1.5 million. The project will use straight line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million and has costs of $600,000

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

Solving for Net Present Value

Software Systems is considering an investment of $20,000, which produces the following inflows: Year CashFlow 1................ $11,000 2................ 9,000 3................ 5,800 Please determine the net present value of the project based on a 20 percent discount rate

NPV, IRR, and Payback for Two Mutually Exclusive Projects

Please help me provide an explanation on how to answer these questions. 1. Consider the following two mutually exclusive projects: Year CF (A) CF (B) 0 -2000 -100,000 1 1500 50,000 2 200 20,000 3 500 30,400 Whichever project you choose, if any, you require a 10 percent return on you

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

Guillermo Furniture: Optimal WACC, valuation techniques to reduce risk, NPV

See attached files. Access the Guillermo Furniture Store Scenario and focus on the analysis of different alternatives available to Guillermo. Determine the optimal WACC and discuss the use of multiple valuation techniques in reducing risks. In addition, calculate NPV of future cash flows for each of the alternatives.

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%

Annual Rate of Return Cash Payback Period, and Net Present Value

Morgan Company is considering a capital investment of $180,000 in additional productive facilities. The new machinery is exected to have a useful life of 6 years with no salvage value. Depreciation is by the straght-line method. During the life of the investment, annual net income and net annual ash flows ar expected to be $20,0

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 Warren Buffet

Warren Buffett, in an interview by students at Columbia University, offered students $100,000 cash in return for 10% of their lifetime earnings. No conditions were attached. Evaluate this offer making any assumptions you need. State the assumptions. The score for this question will based mostly on your solution process, rath

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

Need to figure out NPV

A firm currently uses credit terms of net 35 with no discounts allowed. It has sales of $2M (M = million), cost of sales (at t = 0) of $1.3M. On average, 98% of customers pay in 2 months, while 2% of customers never pay. At a required return of 1% per month, what is the NPV of one year's sales under the current policy?

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

Calculate ROI and NVP for a wireless order-taking system

Identify the ROI and the NVP of the wireless order-taking system Lisa is considering a wireless order-taking system, and she has asked you to do a cost analysis of acquiring it. Consider the following information in your analysis: ? The acquisition cost is $35,000 paid at the time of installation. ? It reduces the wait st

Nosari's Noodle Factory Two Projects: Evaluate Risk

Nosari's Noodle Factory has two projects: Gina's Gemelli and Fran's Farfalle. Gina's has an expected NPV of $1,000. The standard deviation of the NPV is $400. Fran's Farfalle has a expected NPV of $1800. The standard deviation of the NPV is $600. Which project is relatively more risky? (All amounts are in millions o

Calculate net income, net cash flow, FCF and EVA

Last year, ABC had an EBIT of $5 million, depreciation of $1 million, interest of $1 million, and a tax of 40%. ABC has $14 million in non-interest-earning CA and $4 million in CL. It has $15 million in net P&E. the cost of capital is 10%. What is the net income? What is the net cash flow? What is the NOPAT? If the capital in th

Growth Option for Martin Development: Project X's NPV, value of growth option

13-1(Growth Option) Martin Development Co. is deciding whether to proceed with Project X. The cost will be $9 million in Year 0. There is a 50% chance that X will be hugely successful and will generate annual after-tax cash flows of $6 million per year during Years 1, 2, and 3. However, there is a 50% chance that X will be le

Project Evaluation

Kinky Copies may buy a high-volume copier. The machine cost $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $20,000 a year in labor costs but will require an increase in working capital

I need help with this problem

The following table gives the initial investment size and NPV for your firm's 7 available projects A B C D E F G 90 20 60 50 150 40 20 initial investment 140 70 65 -10 30 32 10 NPV If your firm has a limit of 210 to invest, what is the maximum NPV the company can obtain? NOTE: All amounts are in

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

Yummy Foods is considering a new salsa product

Yummy Foods is considering a new salsa product whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight line method over the project's 3-year life, would have zero salvage value, and no new working capital would be required. Revenues and other operating costs are e

Sales Kids' Place is considering a new investment; what is the project's NPV?

Sales Kids' Place is considering a new investment whose data are shown below. The equipment that would be used has a 3-year life, would be depreciated on a straight line basis over the project's 3-year life, would have a salvage value, and would require some new working capital that would be recovered at the end of the project'