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 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
Sundae Corporation is considering the replacement of an existing machine. The new machine would provide better sundaes, but it costs $120,000. The X-tender requires $20,000 in setup costs that are expensed immediately and $20,000 in additional working capital. The X-tender's useful life is 10 years, after which it can be
Pargon Sports: Prepare an analysis of the costs and benefits of Paragon sports' Propose customer-services improvements (Ignore taxes).
Pargon Sports, a major sporting goods retailer, is considering upgrading its customer-support activities by improving online databases and training customer-service personnel. Consider the following data: Data Input Discount rate 10% Annual sales $15,000,000 Average cost of sales as % of sales 60%
Why should issuance costs and mispricing costs be included in the assessment of the project's value? How do you include them?
Why should issuance costs and mispricing costs be included in the assessment of the project's value? How do you include them? Book: Corporate Finance: The Core, 2nd ed.
1. A big challenge with the NPV is the assumptions on the return and inflation. This is less of an issue if we are buying a $100,000 machine with a 5 year life. Real estate however is a long term investment. - How do you estimate inflation over 5 years, 10 years and up to 30 years? - Nobody has a crystal ball and if you esti
Jameson Cargile, Inc. is looking at two new bulldozers with similar investment amounts and has peformed an NPV analysis showing that the YellowJacket has an NPV over the 8 year life of -$6,352,229 while the Bumblebee shows an NPV of -$4,620,640. What could be said about the above situation? A. Both bulldozers are acceptabl
1. How full costing is applied and used by managers to make good business decisions? 2. How are standards determined? Also, how are they used to manage resources? 3. What benefits could be realized by implementing decentralized budgeting and defend with examples? 4. What are two critical requirements for accurate capit
Valuation of Facebook This question requires you, among other things, to calculate the stock price for Facebook, and provide the needed analysis as asked in what follows. You will need to use "Sources of Financial Data" to obtain the necessary financial info/statements for Facebook, Inc., identify its peer companies and obtai
The Salida Salt Company is considering making a bid to supply the highway department with rock salt to drop on roads in the country during the winter. Management believes that the actual quantity will average 25,000 tons per year. The firm will need an initial $1,500,000 investment in processing equipment to get the project star
Pretend that this restaurant Subway at a shopping mall is an indoor location has been open for 12 months and that business is slow and stockholders are putting pressure on us to do better. True or False? Please see attachment.
Problem: 11-49. Inflation capital budgeting. corporate tax division of a major public relations firm
Inflation and Capital Budgeting Problem: 11-49 The head of the corporate tax division of a major public relations firm has proposed investing $295,000 in personal computers for the staff. The useful life and recovery period for the computers are both 5 years. The firm uses MARC's depreciation. There is no terminal salvage
Why is the N.P.V. considered to be theoretically superior to all other capital budgeting techniques? Reconcile this reasoning with the prevalence in practice of using the I.R.R. How would you respond to your C.F.O. if she instructed you to use the I.R.R. technique to make capital budgeting decisions on projects with cash flow st
I am practicing in my NPV and other cash flows analysis methods. Please show me the steps and formulas used to arrive to solutions. Problem#1 What is the net present value of the following cash flows at a discount rate on 12%. T=0/-250,000 t=1/100,000 t=2/150,000 t=3/200,000. Problem#2 You would like to have eno
The Vice president of your division wishes to propose the implementation of a new service for your health care organization and has assigned the project to you. You have gathered all the information necessary to submit the proposal as part of the budget process for next year. You have determined that the new service will require
Essentially, there are four steps in calculating the equity value of a corporation: 1. Forecasting free cash flow for several years on an individual year basis . 2. Calculating terminal value at the end of this forecast time frame. 3. Discounting 1 & 2 with the company's weighted average cost of capital . 4. Subtracting o
Problem 1 ABC Corp is using NVP analysis to evaluate costs associated with orders. Customer credit terms are net 30 days. The opportunity costs to ABC are 10%. The variables costs to the company for each sale is 60% of the sale and administration of credit to customers is 1.5% of sales. A. If an order amount from a new cus
The Doraville Machinery Company is planning to expand its current spindle product line. The required machinery would cost $520,000. The building that will house the new production facility would cost $1.5 million. The land would cost $350,000. Working capital of $250,000 would
For what kinds of investments would terminal value account for a substantial fraction of the total NPV, and for what kind of investments would terminal value be relatively unimportant?
The Cal-Fruit Company specializes in decorative fruit baskets. Currently, the company is analyzing purchase alternatives for a fruit-polishing machine. Data relevant to the decision are as follows:...Please see attachment for questions.
1.) A news clipping service is considering modernization. Rather than manually clipping and photocopying articles of interest and mailing them to its clients, employees electronically input stories from most widely circulated publications into a database. Each new issue is searched for key words, such as a client's company name,
A firm is considering investing in one of the three mutually exclusive projects E, F, G. The firms cost of capital, r, is 15% and the risk-free rate, Rf, is 10%. The firm gathered the basic cash flow and risk index data for the project, as shown below. Initial Investment CF0 E $15,000 F $11,000 G$19,000 Year
You work for a company that extends trade credit to customers. Currently your variable cost ratio is 65% and the annual rate of interest set by the company is 4% and the terms are a 30-day net. It costs you $0.07 on the dollar for administrative costs. Your monthly credit extension is $400,000 and you know (based on previous ca
What are three reasons that cash is worth more today than cash to be received in the future? Define the term return on investment. How is the return normally expressed? Give an example of a capital investment return. How does a company establish its minimum acceptable rate of return on investments? What criteria determine whethe
See attached file. A client has 3 competing investment alternatives which are anticipated to yield returns as indicated in the table provided below. You are to advise the client on the best investment having considered both the Payback and NPV methods. The NPV method will be at 10%. You will also need to write a report exp
6. The following data pertain to an investment that is being considered by the management of Sublex Company: Discount rate 10% Life of the project 5 years Cost of the investment $56,865 Annual cost savings 15,000 Estimated salvage value 3,000 What is the net present value of the proposed investment? Should the project
Calculate stockholders' equity, value of cost of good sold, sustainable growth rate, NPV of zero, compounding, standard deviation of portfolio
1. Based on the following information, calculate stockholders' equity: cash = $30; total current liabilities = $80; accounts receivable = $30; inventory = $90; net fixed assets = $220; accounts payable = $20; long term debt = $50. 2. Calculate the value of cost of goods sold for Large Stone Brewing given the following in
The following are the cash flows of two projects: Year Project A Project B 0 ?$340 ?$340 1 170 240 2 170 240
Capital Structure: Cost of retained earnings; cost of equity; finance new project; payback period; NPV; required rate of return; YTM; stock price
See attached file for proper format. 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
What are major areas of risk in financial management? What are major areas of financial risk in your company? Which risk management techniques are important to your company? Why? If a company uses NPV for capital budgeting, how does an analyst adjust for projects of differing risk? If a company, with a normal payback requirem