Share
Explore BrainMass

Net Present Value (NPV)

Cash Flow and Probability

Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $25,000. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have

Finance: Use of Net Present Value (NPV) to Evaluate Projects

Scenario 1: The manager of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, by the following NPV distribution, there is considerable risk involved: Probability NPV 0.05 ($700,000) 0.20 (250,000) 0.50 120,000 0.20 200,000 0.05 300,000 a. What ar

Assessing Capital Structure

1. The corporate treasurer of Ajax Company expects the company to grow at 4% in the future, and debt securities at 6% interest (tax rate = 30%) to be a cheaper option to finance the growth. The current market price per share of its common stock is $39, and the expected dividend in one year is $1.50 per share. Calculate the cost

Opportunity costs, net present value, expected returns

1. A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump-sum of $10mln, or in parts, where $5.5mln can be provided in year 1, and another $5.5mln can be provided in year 2. Assuming the opportunity interest rate is 6%, what is the prese

Calculating project NPV: Who Dat Restaurant

I know how to calculate NPV, but this problems wants me to calculate operating costs and I can not figure out sales. I really help with this one. Thanks. Who Dat Restaurant is considering the purchase of a $39000 souffle maker. The souffle maker has an economic life of six years and will be fully depreciated by the strai

NPV and Value Maximization

The NPV rule, which says companies should invest in projects for which NPV is greater than 0, depends on the assumption of value maximization. True or false?

Corporate Finance Calculations and Summary

Hi, I need some assistance using Excel to complete the following: First identify or calculate the capital spending, the operating cash flow, the change in net working capital, and finally the free cash flow to the firm of the project. Free Cash Flows are cash flows available to the firm after stakeholders have been paid (int

Net Present Value: Micron Technology

Suppose Micron Technology (NasdaqGS: MU - http://ca.finance.yahoo.com/q?s=MU&ql=0) is considering a new project that will cost $2,225,000 (initial cash outflow). The company has provided the following cash flow figures to you: Year Cash Flow 0 -$2,225,000 1 350,000 2 939,000 3 7

Capital Budgeting for Ernest Corporation

Ernest Corporation is debating whether to purchase a new computerized production system. The system will cost $450,000 and have an estimated 10 year life with a salvage value of $70,000. The estimated operating results from the new production system are as follows: incremental revenue $180,000 incremental

NPV: Blossoms Inc

Please help me setup/solve this equation. Blossoms Inc., a local florist, is considering replacing its current refrigerator used for storing flowers with a larger one. The estimated cost of the new refrigerator will be $30,000. Using a discount rate of 15%, the company calculates a net present value for the new refrigerator o

What is the Breakeven Point, NPV, and IRR ofor Project Alpha?

1. Your firm is considering buying a new machine that costs $200,000, is expected to generate $110,000 in new revenue each year and will cost $45,000 a year to operate. If your firm's marginal income tax rate is 35% what is the Net Cash Flow your firm will realize from the new machine during the first year? Assume the MACRS de

Net Present Value and Salvage Value

For the questions below, I need to know i) When to multiply the net cash flows by the present value. For example do I do 160000*0.8929 and then 130000*0.7972 and so on, or do I multiply the net values only by 160000? ii) Do I multiply the salvage value of 45000* by the fifth year of the present value, add it to the total

NPV of Acquisition of PPE

Meals on wings which supplies prepared meals for corporate aircraft needs to purchase new broilers. The new broilers would replace broilers purchased 10 years ago for $105,000, which are being depreciated on a straight line basis to a zero salvage value (15 year depreciable life). The old broilers can be sold today for 63,000. T

Capital Budgeting e-Activity

1. Based on the e-Activity, if your superior negated your analysis and chose Project B due to payback period, explain how you would justify the financial implications in choosing Project A. 2. Based on the e-Activity and your response above, revise Project B so as to make it an acceptable alternative to Project A. (In y

Seating Unlimited Inc: Olympic Lawn Chairs

Seating Unlimited Inc. is considering producing a specialty lawn chair for the next Olympics, which will occur in two years. The new production line will require a $100,000 investment in fixed assets which will fall into the MACRS five-year class. The firm's market research department anticipates sufficient demand for the lawn

Financial Analysis: FedEx Corporation

See the attachments. For the course project, you are to choose FedEx corporation (http://www.fedex.com/us/investorrelations/financialinfo/goals ; http://ir.fedex.com/annuals.cfm ; http://files.shareholder.com/downloads/FDX/992754901x0x395636/5b8f7453-b960-4f0f-92cd-ec27cab06760/FedEx_2010_AR.pdf) that is listed and traded on

Various Economics Questions

Please explain how to find the answers to the following questions. 1. Broken Corporation sells a piece of equipment it owns today for $65,000. This equipment has been fully depreciated, using MACRS rules and had an original cost of $78,000. The company's tax rate is 38%. What is the after-tax cash inflow to the firm from the

Net Present Value: Micron Technology Project

Net Present Value (NPV) method is one of the most important methods which is used to make capital budgeting decisions by almost every company. NPV method is important because it helps financial managers to maximize shareholders' wealth by making better capital budgeting decisions. Suppose Micron Technology is considering a ne

NPV Problems

1) The Heritage Amusement Park would like to construct a new ride called the Sonic Boom, which the park management feels would be very popular. The ride would cost $450,000 to construct, and it would have a 10% salvage value at the end of its 15-year useful life. The company estimates that the following annual costs and revenues

Case Study and Analysis

I need help with the following, using the case attached. The spreadsheet can be found using the link below. 1. Read Case 18: Portland Cancer Center on page 135 in the Cases in Healthcare Finance text. 2. Assume that you have been hired as a consultant to recommend a course of action for the Gamma Knife acquisition. Prepare

Calculating NPVs and IRRs of Given Projects

Suppose we have two mutually exclusive land development projects. The first is a office building which can be constructed for an initial outlay of $20 million and sold a year later for $24 million. The other use of the land is for a parking lot where an initial outlay of $10,000 will produce a cash inflow of $10,000 per year for

What is the time value of money?

What is the time value of money? How do net present value (NPV) and future value (FV) impact the concept of time value of money?

NPV Calculations for Expanding Company.

I need help calculating the attached spreadsheet, If I subtract the metrics in red from the metrics in black how will this calucate the required values for the PV and NPV? I know the PV is the present value factor, but how do I find the PV cash flows to calculate the NPV? A firm is going to expand into 5 domestic markets (Chic

NPV Analyses

Based on the following data/assumptions: Refurbishment an Existing Boat 1. Useful life 20 years 2. Rehabilitation costs $115,000 3. Estimated value of existing new spare parts that could be used to offset the rehabilitation costs $43,500 4. Dismantling and scrapping of old parts offset by salvage 5. Straight-line deprec

John Doe has recently been appointed as Chief Risk Officer for Tutale(pty) Ltd

1. John Doe has recently been appointed as Chief Risk Officer for Tutale(pty) Ltd, however, John realised that the company rely heavily on fixed-interest bearing debt for financing, moreover,the rare earth stone business may not be sustainable in the long run.Kindly advice John on what to advice management on the financial and b

Capital Budgeting : NPV Method

Problem 1 The president of E-Games, an online gaming company, is considering the purchase of some equipment used for the development of new games. The cost is $400,000, the economic life and the recovery period are both 5 years, and there is no terminal disposal value. Annual pretax cash inflows from operations would increase

NPV and Break-Even Point

Ben's is a sit-down restaurant that specializes in home-cooked meals. Melissa's is a walk-in deli that specializes in specialty soups and sandwiches. Both firms are currently considering expanding their operations during the summer months by offering pre-wrapped donuts, sandwiches, and wraps at a local beach. Ben's currently has

Time Value of Money for Savings for a College Fund

Suppose that a young couple just had their first baby and they wish to ensure that enough money will be available to pay for their child's college education. Currently, college tuition, books, fees, and other costs, average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year

Making Investment Decisions with the Net Present Value Rule

The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2,000 ca

Beacon Company and Quillen Company

Beacon Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $400,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,000. Project B will cost $280,000 , has an expected useful life of 10 years, a