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. 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
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.
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 13%. The cash flows for each project are shown in the following table. Project A Project B Initial Investment (CFo) $80,000 $50,000 Year (t)
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
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
The net present value of a project is zero. The minimum desired rate of return used to obtain the net present value is 8%. Which of the following statements is TRUE? Answer A. The project is desirable if the minimum desired rate of return is 10%. B. The project is desirable if the minimum desired rate of return is 6%.
If the net present value of an investment project is positive, then the project is ________. If the net present value of an investment project is negative, then the project is ________. Answer A. ignored; accepted B. rejected; accepted C. unacceptable; acceptable D. desirable; undesirable.
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, 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
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
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
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
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
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
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
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?
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
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
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
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
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
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
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
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. 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
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
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 (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
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