What would be the initial‚ operating‚ and terminal cash flows generated by the new oven? b. What is the payback period for the additional oven? c. Barbarian Pizza’s RRR is 12%. What is the NPV of the additional oven? d. What is the IRR of the additional oven? 2. Chin Jen Lie is considering the expansion of his chain of Chinese restaurants by opening a new restaurant in Duluth‚ Minnesota. If he does‚ he estimates that the restaurant will require a net initial outlay of $500‚000
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Shapiro: Chapter 2: Capital-Budgeting Principles and Techniques QUESTIONS 1. a. What is the relationship between accounting income and economic profit? Answer: Accounting income is calculated by taking revenues and subtracting all cash and non-cash expenses (such as depreciation). Accounting income also often recognizes losses for tax purposes as well‚ even though the economic loss may have taken place at another time. Economic profit is the sum of the present values of all the cash flows
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consider IRR as independent variable‚ NPV at minimum ROR and Equivalent Annuity as functions (just like Polynomials function in Math) for each 10 projects because project 6 (Effluent – water treatment at four plants) definitely should be done. According to this analysis I found the location of abruptions and ranked projects by higher IRR. - Profitability Index It can be calculated by using of WACC (10.6%) and free cash flows. - Reinvestment Rate Comparisons for projects at WACC and IRR
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help with this process‚ financial managers can use capital budgeting techniques which have groups of calculations and sets of decision rules. The techniques that are used are called payback period‚ net present value (NPV)‚ internal rate of return (IRR)‚ and profitability index (PI) (Lasher‚ 2011‚ p. 456-458). The payback period is generally the easiest budgeting technique out of the group and provides an financial manger an estimation on how long the original cost of their investment back and this
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develop the technology in house. I apply four traditional performance measures (NPV‚ IRR‚ MIRR and Payback period) to decide whether to buy or build the technology. First of all‚ I use the given data to make the assumptions for both buy and build analysis. Next‚ I use the assumptions to calculate the after-tax cash flow. Last but not the least‚ I have the after-tax cash flow and I use excel to calculate the NPV‚ IRR‚ MIRR‚ and Payback period. From NPV perspective‚ both buying and building the technology
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Fin 3010 Dr. Michello Summer 2007 Practice Problems Expected dividend yield Answer: a EASY i. If D1 = $2.00‚ g (which is constant) = 6%‚ and P0 = $40‚ what is the stock’s expected dividend yield for the coming year? a. 5.0% b. 6.0% c. 7.0% d. 8.0% e. 9.0% Expected return‚ dividend yield‚ and capital gains yield Answer: e EASY ii. If D1 = $2.00‚ g (which is constant) = 6%‚ and P0 = $40‚ what is the stock’s expected capital gains yield for the coming year? a. 5.2% b. 5.4%
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discounted cash flow of valuation‚ which is the process of valuing an investment by discounting future cash flows. Comparison to another rule‚ which is called the Internal rate of return‚ uses the discount rate that makes the NPV of an Investment zero. IRR finds the single rate that summaries the rate of return of a project. We only depend on cash flow of a particular investment not the rates offered elsewhere. For an example‚ you let your brother burrow 100 dollars but he pays you back 125 dollars
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| Indian Railways | Prepared By | | Mahesh G | | | Contents Scope: 2 Indian Railways - Background: 2 Market Structure: 6 Conclusion: 9 Bibliography: 10 Scope: This brief study aims at analyzing the market structure of Indian Railways. It starts with the history of railways and explores the various characteristics of railways. It also provides a brief comparison of Indian railways vis-à-vis World Railway system. Indian Railways - Background: Indian railways
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estimate a proxy for a firm’s internal rate of return (IRR) in order to approximate the distortion between ARR and IRR. Results show that the magnitude of the difference is reduced for firms with a higher degree of matched expenses. The median magnitude is 2.3% for the highest matching quintile‚ suggesting that matching expenses provides a reasonable proxy for economic profitability. Secondly‚ it is argued that reducing the gap between ARR and IRR leads to more timely information included in current earnings
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technologies. There are two options to be considered: purchasing technologies from outside providers or developing the technologies within the company. As financial analysts‚ we evaluate the two options by calculating and analyzing NPV‚ payback‚ IRR‚ and MIRR for each alternative. Analysis indicates that developing the technologies is more optimal as it outperforms the alternative in all measures. Among all measurements‚ we believe NPV to be the most effective. The details of our analysis are
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