Harvard Business Case: 9-202-027 April 18, 2002 Angela Chao Ocean Carriers I need help with the mathematical analysis along with an explanation of the analysis and the conclusion.
1.Return to the Diversified Electronics case covered in class. (file attached) Suppose the annual lease payment is revised to $180,000. Then, relative to the alternative of buying the equipment, the after-tax cash inflows to Diversified are A.greater when the equipment is purchased. B.greater when the equipment is leased.
Can you help me get started on this assignment? Chapter 9: Net Present Value and Other Investment Criteria 1. An investment project requires an initial investment of $400 and produces a cash inflow of $460 in 1 year. The internal rate of return (IRR) on this project is 15%. If the cost of capital is 10%, then the NPV of th
1. You are thinking of retiring. Your retirement plan will pay you either $250,000 immediately on retirement or $350,000 five years after the date of your retirement. Which alternative should you choose if the interest rate is: A)0% per year, B) 8% per year, C) 20% per year? 2. You have been offered a unique investment opport
1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year's end. The likely effect of paying the dividend would be to A.have
As the director of capital budgeting for ABC Corporation, you are evaluating two mutally exclusive projects with the following net cash flows: A B 200,000 -125,000 65,000 60,000 60,000 40,000 50,000 40,000 65,000 35,000 50,000 45,000 If ABC corp cost capital is 12%, defend which project would
Payments of 5000 and 7000 are due 3 and 5 yrs respectively from today. They are to be replaced by two payments due 1 1/2 and 4 yrs from today. the first payment is to be half the amount of the 2nd payment. what should the payments if money can earn 7.5% compounded semiannually?? ans: 3711.68 7423.35 Manuela purchased a bo
ACE Rental Cars, Incorporated (ACE) is analyzing whether to enter the discount used rental car market. This project would involve the purchase of 100 used, late-model, mid-sized automobiles at the price of $9,500 each. In order to reduce their insurance costs, ACE will have a LoJack Stolen Vehicle Recovery System installed in
1. Pierre Imports is evaluating the proposed acquisition of new equipment at a cost of $95,000. In addition the equipment would require modifications at a cost of $10,000 plus shipping costs of $2,000. The equipment falls into the MACRS 3-year class, and will be sold after 3 years for $35,000. The equipment would require an
Using net present value, determine the proposal's appropriateness and economic viability. Prepare a report explaining your calculations and conclusions. Answer the following in your report: o Explain the effect of a higher or lower cost of capital on a firm's long-term financial decisions. o Analyze the use of cap
Question: Wachowicz Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process S has a cost of $8,000 and will produce net cash flows of $5,000 per year for 2 years. Process L will cost $11,500 and will produce cash flows of $4,000 per year for 4 years. The company has a contract that re
Konika Ltd. is considering manufacturing a new product. This requires machinery costing Tk. 20,000 with a life of four years and a terminal value of Tk.5,000. Profits before depreciation from the project will be Tk.8,000 per annum. An investment of working capital of Tk.2,000 will be required for the duration of the project. T
17. Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the end of each of the next 2 years. The system could be replaced every 2 years, and the
Need assistance with the following question. Need an explanation of corporate risk mitigation techniques used in capital budgeting. Thanks
Dungan Corporation is evaluating a proposal to purchase a new drill press to replace a less efficient machine presently in use. THe cost of the new equipment at time 0, including delivery and installation, is $200,000. If it is purchased, Dunagn will incur costs of $5,000 to remove the present equipment and revamp its facilities
If anyone can offer any type of significant help to me, or better yet get me on the right track, I would greatly appreciate it! I've enclosed my problem down below and additional details are in the excel document. I'm having a hard time distinguishing what is meant by internal funds and if the numbers I'm obtaining are corre
Martinez Company has money available for investment and is considering two projects each costing $70,000. Each project has a useful life of 3 years and no salvage value. The investment cash flows follow: Project A Project B Year 1 $ 8,000 $28,000 Year 2 24,000 28,000 Year 3 52,000 28,000 Instructions If 8% is an accept
You've been hired fresh off your Augsburg MBA as a financial consultant to the Mayo Clinic (MC), a new, for-profit, publicly traded firm that is the market leader in kidney dialysis systems (KDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of KDSs. This will be a five year project.
Raphael Restaurant is considering the purchase of a $10,000 souffle maker. the souffle maker has an economic life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 2000 souffles per year, with each costing $2 to make and priced at $5. Using excel, assume that the discount rate is 1
Your division is considering two projects with the following net cash flow (in millions): Year 0 Year 1 Year 2 Year 3 Project A -$25 $5 $10 $17 Project B -$20
Below is the 2004 year-end balance sheet for Banner, Inc. Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005. In addition, we know that Banner plans to pay $90,000 in 2005 dividends and expects projected net income of 4% of sales. (For consistency with the Answer selections provided, round your forecast
Which of the following statements is most correct? a. If new debt is used to refund old debt, the correct discount rate to use in discounting cash flows is the before-tax cost of new debt. b. The key benefit associated with refunding debt is the reduction in the firm's debt ratio and creation of reserve borrowing capacity
Compare two alternatives for equipment purchases using capital budgeting techniques. To be honest, I don't even know where to start with this problem and would appreciate any help that you feel is allowed. At least something that could get me started and allow me to check my work when finished. Thank you for your help.
INPUT OUT PUT 55000 Current salary Current job Calculate and show formulas 40 Years until retirement After Income 0.03 Salary increase 0.26 Tax rate Present value of salary Wilton Wilton MBA 65000 Tuition per year PV of tuition & expenses 2500 Books & Supplies 100000 St
1. In your own words, explain the concept of cost of capital. How may cost of capital affect long-term financial decisions? Would a company prefer to have a high or low cost of capital? Why? What was the effect of cost of capital on long-term financial decisions for your company? 2. Why is capital budgeting part of a compan
The Net Present Value of a Stream of Cash Flow 11. You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1500 two years from now, and $10,000 ten years from now. a) What is the NPV of the opportunity if the interest rate is 6% per year? Should you
Impressions Company is a medium sized commercial printer of promotional advertising brochures, booklets, and other direct mail pieces. The firm's major clients are ad agencies based in New York and Chicago. The typical job is characterized by high quality and production runs of more than 50,000 units. Impressions Co has not been
Please see attached sheet for complete list of questions and details. Year Investment X Investment Y 1 $1,000 $1,300 2 800 2,800 3 700 100 4 1,900 5 2,000 a. Under the payback method, which investment should be chosen? (Show your work/analysis/calculations for each investment).
How accurate do you think a company's estimates of the net present value of a proposed project are? Refer to both the initial investment and to the components of the cash flow: revenues, operating expenses, depreciation, taxes, and the cost of capital to use for the computation of the present value. Keep in mind that NPV is t
An entrepreneur develops a business plan that requires an initial investment of $2,200 million with a further investment of $2,200 million each year on an ongoing basis. Investment is expected to yield sales revenue equal to 70 percent of the investment in each of the two years following the investment. Accounting rules require