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Net Present Value (NPV)

Plant construction project: valuation methodologies, NPV, IRR, MIRR

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

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

Replacement Decisions

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $390,000; the new one will cost $780,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth $90,000. The new machine will save us $125,000 per year in operating costs. The tax rat

Pierre Bouvier is evaluation four projects: cash flow and NP

B5. (Investment criteria) Pierre Bouvier is evaluating four projects. The cash flows for the four projects are given here. a. Pierre thinks you can rank these projects from best to worst by simply inspecting the cash flows (and not calculating anything). Try to do so. b. Pierre next found the NPV of each project, discounti

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

NPV and Overall Gain: Nodhead College and Compulease

Nodhead College needs a new computer. It can either buy it for $250,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $62,000. Nodhead pays no tax. Compulease pays tax at 35%. Compulease can depreciate the computer for tax purposes over five years. The computer will have no

Debt financing for Nodhead College

Nodhead College needs a new computer. It can either buy it for $250,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $62,000. Nodhead pays no tax. Compulease pays tax at 35%. Compulease can depreciate the computer for tax purposes over five years. The computer will have no

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

20 MCQ: Shareholder wealth, ratios, financing, cash budget, NPV, IRR, break even

1) Why is maximizing shareholder wealth a better goal than maximizing profits? a. Maximizing shareholder wealth places greater emphasis on the short term. b. Maximizing profits ignores the uncertainty that is related to expected profits. c. Maximizing shareholder wealth gives superior consideration to the entire portfolio of

Caledonia: Mutually Exclusive Projects

Please help with Part F. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR PROJECT A PROJECT B 0 -$100,000 -$100,000 1 32,000 0 2 32,000 0 3 32,000 0 4 32,000 0 5 3

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


In order to expand its business, Auto Parts Distributing, Inc., is considering the purchase of 10 pickup trucks at a total cost of $150,000. The company expects to keep these trucks for four years, then sell them. The company expects these trucks to generate a pretax net cash flow of $75,000 in year 1, $70,000 in year 2, $65,000

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.

Lease financing for Western Fabrics' new automated weaving loom.

See the attached file for the questions and templates to complete the problem: Okay to go ahead with a to c without the goal seek function. As part of its overall plant modernization and cost reduction program, Western Fabrics' management has decided to install a new automated weaving loom. In the capital budget

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

Sorenson Stores

9. Sorenson Stores is considering a project that has the following cash flows: Year Cash Flows (end of period) 1 $2,000 2 $3,000 3 $3,000 4