Share
Explore BrainMass

Net Present Value (NPV)

Capital Budgeting: Present Value

** Please see the attached file for the correct formatting ** Caledonia Products Your boss would like you to look at a new project. This project involves the purchase of a new plasma cutting tool that can be used in its metal works division. The products manufactured using the new technology are expected to se

Evaluating Projects Using NPV

A firm is considering the adoption of a project that is expected to generate revenues for 10 years. These expected revenues (in dollars) are: Year 1: $200,000 Year 6: $270,000 Year 2: 250,000 Year 7: 255,000 Year 3: 300,000 Year 8: 240,000 Year 4: 300,000

Sketching NPV profiles and Determining Crossover Rate

1.) NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$43,000 -$43,000 1 23,000 7,000 2 17,900 13,800 3 12,400 24,000 4 9,400 26,000 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these t

Net Present Value of Investment: Zeron Example

The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000. The investment is expected to generate $400,000 in annual cash flows for a period of four years. The required rate of return is 12%. The old machine can be sold for $50,000. The machine is expected to have zero value at the en

Comparison of NPV and Payback of Three Projects

(Payback and NPV) Three projects have the cash flows given here. The cost of capital is 10%. a. Calculate the paybacks for all three projects. Rank the projects from best to worst based on their paybacks. b. Calculate the NPVs for all three projects. Rank the projects from best to worst based on their NPVs. c. Why are these t

Break-Even Price Calculation: Example Question

Firm AAA that is considering the purchase of a new machine. They have asked you to arrive to a break-even price, so that the NPV of the entire operation would be equal to zero. The new machine is expected to produce the following effects: Operating expenses will be reduced by $12,000 per year for 10 years; The existing mac

Financing/Investing - Beta Value

The TT Company is planning to put a manufacturing facility in place to build telescopes. The systematic risk of this project alone is 25% greater than those currently manage. The company has a capital structure in which 35% of the firm value is debt on which they pay 14% interest. The beta of its equity is currently .8 and the c

Finding NPV of the given proposal

A machine has a cost of $5,375,000. It will produce cash inflows of $1,825,000 (Year 1); $1,775,000 (Year 2); $1,630,000 (Year 3); $1,585,000 (Year 4); and $1,650,000 (Year 5). At a discount rate of 16.25%, what is the NPV? a. $81,724 b. $257,106 c. $416,912 d. $190,939

a. Calculate each project's payback period. b. Calculate each project's net present value. c. Calculate each project's internal rate of return. d. Are these projects comparable?

Please use the attached Excel sheet and formulate answers to questions 11a - 11d, 12a - 12e and 13a - 13d. 11. Caledonia is considering two investments with one-year lives. The more expensive of the two is the better and will produce more savings. Assume these projects are mutually exclusive and that the required rate of retu

Capital Budgeting and Budget Analysis

Beautifully Fabulous Beauty Salon manufactures two products, Beauty Gloss and Cocooning Spray. Beauty Gloss is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Cocooning Spray. Beauty Gloss is produced on an automated production line. Due to the forecast of economic growth

Evaluate possible new product launch by a manufacturing company: Cash flow, NPV

A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new pla

Graduate Level Finance Question regarding bonds and maturities

Please explain how to solve Tab 3-4 in spreadsheet attached. Principles of Corporate Finance. Thanks for helping me out here!! ** EXCEL file attached ** Here are the prices of three bonds with 10-year maturities: Bond Coupon (%) Price (%) 2 81.62 4 98.39 8 133.42

Capital Budgeting

A machine costs $380,000 and is expected to produce the following cash flows: Year 1 2 3 4 5 6 7 8 9 10 Cash Flows (000s) $50 $57 $75 $80 $85 $92 $92 $80 $68 $50 If the cost of capital is 12 perc

Capital Budgeting

Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The forecast for revenues are $5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1.5 million. If

Project's Operating Cash Flow During Year 1

Delta Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 3-year life. What

Business: NPV, IRR, Payback, WACC, and Operating Cash Flow

1. Blanchford Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected. WACC = 10% Year: 0 1

PROBLEM 9-17. Conflict between Performance Evaluation and Use of NPV

Division managers at Creighton Aerospace are evaluated and rewarded based on ROI (return on investment) targets. In the current year, Delmar Richards, the president of the commercial products division, has an ROI target of 12 percent. If the division has an ROI of 12 percent or greater, Delmar will receive 250,000 options on Cre

Calculating a Series of Accounting Values

Adrian Sonnetson, the owner of Adrian Motors, is considering the addition of a paint and body shop to his automobile dealership.Construction of a building and the purchase of necessary equipment is estimated to cost $800,000, and both the building and equipment will be depreciated over 10 years using the straight-line method.The

Calculating Net Present Value: Example Question

An investment that costs $60,000 will return $25,000 per year for five years. Determine the net present value of the investment if the required rate of return is 14 percent. (Ignore taxes.) Should the investment be undertaken?

NPV

1. A firm is considering some projects. Use a cost of capital of 10%. Time 0 1 2 3 Day -200,000 100,000 100,000 100,000 Night -150,000 50,000 105,000 85,000 Sun -100,000 0 0 190,000 a) If the projects are independent, which one(s) do you select? b) If the projects are mutually exclusive, which one do you select?

NPV for Tobasco Corporation

Tobasco Corporation is contemplating a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected. WACC = 10% Year: 0 1 2 3 4 Cash flows: -$1,000 $475 $475 $475 $475

Accounting - Choosing Between Two Alternative Plans

Situation: The firm builds thrill rides for amusement and theme parks. The rides are engineered at its headquarters in Tampa, Florida in collaboration with engineers in India and China. Once designed, production plans are engineered by a firm in Malaysia. The component parts of the rides are manufactured in Mexico and Tampa.

Finance:Net present value, IRR and MVA.

There are 7 questions included in the word file....some data doesn't copy.... 1) A company has capital of $125,000,000. It has an expected ROIC of 9%, forecasted constant growth of 5%, and a WACC of 10%. What is its value of operations? What is its MVA? Hint: Use Equation: Round your answers to the nearest dollar, if nec

NPV

1) What does an NPV exactly equal to zero really mean? a) Discuss. Would a firm undertake an investment with an NPV of zero? Why? b) How can firms position new ventures to have NPVs of greater than zero? What are some strategies for that?

Strathcona Paper: Use NPV to support decision for investment

Strathcona Paper rewards its managers on the basis of after tax return on investment of assets that they manage- the higher the reported return on investment, the higher the reward. The company uses the net book value to value the assets employed in the return on investment calculation. The company's cost of capital is assessed

Finance

Introduction You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm's cost of capital (Task 5).

Projects After-Tax Cash Flows

Your division is considering two projects. Its WACC is 10 percent, and the projects after-tax cash flows (in million of dollars) would be: TIME 1 2 3 4 5 ------------------------------------------------- Project A: -$30 5 10 15 20 Project B: -$30 20 10 8 6 a. Calc

Capital Budgeting Cash Flows Question

Question Business XYZ is deciding whether or not to replace an existing asset. The proposed asset has a purchase cost of $40,000 and an installation cost of $6,000. The proposed asset will be depreciated over a six-year span using the straight-line depreciation approach. The new asset is expected to elevate sales by $18,000