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Net Present Value (NPV)

Solve: Preparing Budgets

Let's take a look at budgets. If anything, a budget is simply a report of expected results over a period. These can be operational, financial, or strategic. You are an individual within the finance area of your company, and you are preparing final budgets to present to your board of directors for the coming year. You have bee

NPV, IRR, MIRR, Profitability Index, Payback, Discounted Payback,

(10-1) NPV A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project's NPV (Hint: Begin by constructing a time line.) (10-2) IRR Refer to Problem 10-1. What is the Project's IRR? (10-3) MIRR Refer to Problem 10-1 What is t

Eddison Electronics Co (EEC) NPV, IRR, Payback & Memo to President

EEC's president announced that one of its largest suppliers is open to being acquired. Analyze the feasibility of acquiring this supplier using net present value (NPV), internal rate of return (IRR), and payback methods. The following assumptions are the best knowledge at this time: 1. EEC will save $500,000 annually for

Introduction to Corporate Finance

A company is considering building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $500,000; it has a current market value of $800,000. The building can be erected for $600,000. Machinery (eq

Evaluating cost and benefit for a capital budgeting decision

Capital Budgeting Sky View Resorts, Inc. (SVR) SVR owns and operates a resort lodge in Western Maryland. The BOD is considering the replacement of the seven years old HVAC system with a newer and more energy efficient system. The decision has been accelerated since the US Congress has approved tax incentives for business

Knowing the Price per Share to Pay When Acquiring Target Firms

See the attached file. It's January 2013 and Han Solo Enterprises is considering an acquisition of Princess Leia Inc., a large private company headquartered in Orlando, Florida. As part of the process of evaluating the acquisition, your boss at Han Solo Enterprises, Lando Calrissian, has asked you to perform a valuation of Pr

Dog Up! Franks NPV

Dog Up! Franks is looking at a new sausage system costing $515,000, depreciated using straight line method over five years with a $77,000 salvage value. The sausage system will save $195,000 annually in pretax operating costs, and the project requires an initial working capital of $36,000.. If the tax rate is 35 percent and the

Operating Costs, Investments, Depreciable Setup Costs

Molecugen has developed a new kind of cardiac diagnostic unit. Owing to the highly competitive nature of the market, the sales department forecasts demand of 5,000 units in the first year and a decrease in demand 10% a year after that. After 5 years, the project will be discontinued with no salvage value. The marketing departmen

Calculating the NPV and IRR

MOMO-FastCopy considers replacing its park of copiers. The management anticipate that new machines will lead to more economic use of raw materials, reduced labor costs, and increased revenues. The firm estimates that the installation of machines will save $50,000 on raw materials and $75,000 on reduced labor costs and will incre

Doughboy Bakery

Doughboy Bakery would like to buy a new machine for putting icing and other toppings on pastries. These are now put on by hand. The machine that the bakery is considering costs $81,000 new. It would last the bakery for nine years but would require a $6,000 overhaul at the end of the fifth year. After nine years, the machine coul

Net Price Value

1. What is the present value of $25,000 that you will receive at the end of two years with a discount rate of 5.6%? PV=C_2/(1+r_2 )^2 =25,000/(1+(0.056)^2 )=$22,000.14 So I think that I've got the right answer to this one, which should be 22,000.14? If I'm incorrect please guide me to the correct answer. 2. What is the

MACRS and Present Value

The general manager of a mining company has a chance to purchase a new drill at a total cost of $250000. recovery period is 5 years. Additional annual pretax cash inflow from operations is $82000. economic life of drill 5 years with no salvage value. tax rate is 35% and the after tax required rate of return is 16%. 1.Compute th

Net Present Volume, Mergers and Acquisitions

Part I: Net Present Value (NPV) method is one of the most important methods used to make capital budgeting decisions by almost every company. NPV method is important because it helps financial managers maximize shareholders' wealth by making better capital budgeting decisions. Suppose Micron Technology (NasdaqGS: MU - http

Evaluating Methods for Providing Home Health Service

Capitol Healthplans Inc. is evaluating two different methods for providing home health services to its members. Both methods involve contracting out for services and the health outcomes and revenues are not affected by the method chosen. Therefore, the incremental cash flows for the decision are all outflows. Here are the projec

Net Present Value in Health Care Organizations

Capitol Healthplans, Inc., is evaluating two different methods for providing home health services to its members. Both methoeds involve contracting out for services, and the health outcomes and revenues are not affected by the method chosen. Therefore, the incremental cash flows for the decision are all outflows. here are the pr

evaluaing the attractiveness of a potential project

JP Products, Inc. has gathered data to evaluate the attractiveness of a potential project. The company knows the cash flows expected under different scenarios. It has conducted a focus group that ranks various product attributes, and it has the ranking of various marketing techniques provided by a consulting company. What met

NPV & Inventory

5.The following data have been collected by capital budgeting analysts at Rykers concerning an investment in an expansion of the company's product line. Analysts estimate that an investment of $210,000 will be required to initiate the project at the beginning of 2010. Estimated cash returns from the new product line are summariz

Net Present Volume (NPV) Calculations

Require assistance calculating NPV: The following data have been collected by capital budgeting analysts at Home Grown concerning an investment in an expansion of the company's product line. Analysts estimate that an investment of $210,000 will be required to initiate the project at the beginning of 2010. Estimated cash retur

Net Present Value and Payback Period of an Opportunity

Leona Rosato just won a lottery and received a cash award of $400,000 net of tax. She is 61 years old and would like to retire in four years. Weighing this important fact, she was found two possible investments, both of which require an immediate cash payment of $ 320,000. The expected cash inflows from the two investments oppor

MARR of mutually exclusive alternatives

Following are the cash flows and a MARR of five mutually exclusive alternatives (only one can be chosen). MARR = 14% Year 0 1 2 3 4 5 Alternative A ($3,000) $500 $750 $1,100 $1,500 $1,200 Alternative B ($5,700) $1,100 $1,500 $2,000 $2,5

Using NPV When Considering Alternatives for Retirement

8. The owner of the krusty krab is considering selling his restaurant and retiring . An investor has offered to buy the Krusty krab for $ 350.000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. 2. Hire someone to manage the restaura

Free Cash Flow & Project Valuation

Case Study: Free Cash Flow & Project Valuation Company "A" is considering the launch of a new product. The company currently uses 35% tax bracket with 15% discount rate. Expected duration of the project is five years, then terminated. See information as follows: Cost of new plant & equip: $7,900,000 Shipping and Install

Quaker Oats annual report

Quaker Oats. In its annual report, the Quaker Oats Company discloses following: Financial objectives: provide total shareholder returns (Dividends plus share price appreciation) that exceed both the cost of equity and the S&P500 stock index over time. Quaker's total returns to shareholders for year 11 was 34%. That compares

How Companies Choose Investment Options

1. Please help to find out how companies (any one) chose investment options (for example investment appraisal) & undertake their budgeting procedure. 2. Research different types of budgets, giving example from real business.

Net Present Value, Mergers, and Acquisitions

Rumors about potential mergers and acquisitions are often a hot topic in the business press and there have been rumors that Google is considering acquiring Groupon. As you know, mergers and acquisitions can potentially bring about great rewards but also can potentially bring great risks and pitfalls. For this assignment, do s

Time Value of Money In Economic Decision

You are on assignment from the finance department to develop another workbook for the next weekly staff meeting that explains to the team why the time value of money is important in an economic decision; but keep it to the basics, ticking to the two most common tools used in business to incorporate the time value of money into o

Calculations determining the benefits of buying new equipment capital

Please undertake calculations in order to evaluate this project, and decide if it should be accepted or rejected. Texas Roks, Inc. is considering a new quarry machine. The costs and revenues associated with the machine have been provided to you for analysis: Cost of the new project $4,000,000 Installation

Deer Valley Lodge: NPV and Subjective Factors

Deer Valley Lodge, a ski area near Salt Lake City, has plans to eventually add five new chairlifts. Suppose that one of the lifts costs $2.2 million, and preparing the slope and installing the lift costs another $1.48 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the l

Net Investment, Annual Net Cash Flows, NPV, Payback Period

I am looking for step-by-step instructions on how to set this problem up to solve for a through d on the attached. I can write it up and explain the reasoning but I'm stuck on how to solve. This is for my MBA finance class and the book gives more basic examples of NINV, cash flows, etc. Not sure what to do with so many factors i