Capital Budgeting Case Learning Team A QRB/501 Quantitative Reasoning for Business July 29‚ 2014 Dr. Larry Olanrewaju Capital Budgeting Case Our Company has the opportunity to obtain another corporation. We have to choose between two companies‚ Company A or Company B. We only have $250‚000 to spend to purchase the companies. Because of this financial constraint‚ acquiring both corporations is not an option. Therefore‚ we must determine what company would be better to acquire. Company A Company
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The Boeing 7E7 To develop or not to develop? that is the question Executive MBA in Business & IT Class of 2014 Module 5 – Risk & Finance - Assignment Author: Luís Faria Reviewer: Prof. Dr. Christoph Kaserer The Boeing 7E7 Subject Page Module 5 – Risk & Finance - Assignment 2/15 Abstract With Airbus surpassing Boeing’s commercial aircraft market share‚ and revenues falling since the terrorist attacks on September 11‚ the key question in this assignment is whether Boeing should
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AC505 Part B Capital Budgeting problem Clark Paints Cost of new equipment $200‚000 Expected life of equipment in years 5 Disposal value in 5 years $40‚000 Life production - number of cans 5‚500‚000 Annual production or purchase needs 1‚100‚000 Initial training costs Number of workers needed 3 Annual hours to be worked per employee 2‚000 Earnings per hour for employees $12 Annual health benefits
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| Goodweek Tires‚ Inc. | A Case Study | | | | | Table of Contents: * Case Overview * Project Information * Capital Budgeting Analytical Measures * Forecasted Sales Numbers * Depreciation Schedule * Investment Cash Flows * Recommendation & Conclusion GOODWEEK TIRES INC. Case Overview Goodweek Tires‚ Inc. recently developed a new tire‚ SuperTread. This tire was meant to be ideal for drivers who do a lot of wet weather‚ off-roading‚ and normal freeway driving
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Chapter 2 Opportunity cost of capital – rate of return expected to be received from alternate investments forgone. NPV – Present value of cash flows less the cost of acquiring the asset acquire assets with positive NPV‚ positive NPV = good project Rate of Return = profit/cost or investment (good investments have higher rate of return than opportunity cost) Higher discount rate ( lower discount factor (lower NPV Investment Decision Rules: 1. accept if positive NPV 2. accept
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The Boeing 7E7 WACC Estimation In order to evaluate the prospective IRRs from the Boeing 7E7‚ we first try to estimate an appropriate required rate of return for accepting this project. The capital asset pricing model is applied to estimate the cost of equity of the commercial aircraft division: R_EC= β_EC*(R_M-R_f )+R_f where REC is the cost of equity capital of the commercial aircraft division. βEC is the beta for the commercial division of Boeing. This beta is used instead of the company’s
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machinery industry is 0.88. Through the use of the CAPM model‚ these betas yield a cost of equity for the home appliances of 11.29% and for the agricultural machinery of 10.7%. The WACC of each individual project is then compared to the project’s IRR. The WACC of the home appliance project was found to be 10.4% and the WACC of the agricultural machinery project was calculated as 9.92%‚ while the IRR’s of the appliance and agricultural machinery projects were 11.29% and 10.7%‚ respectively. Therefore
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E.I du Pont de Nemours & Co.: Titanium Dioxide Group#: 7 Lu Yu Yang Hu You Wang 1 1. There are basically three technologies to produce TiO2: sulfate process‚ rutile chloride process and ilmenite chloride process. Most of Du Pont’s competitors‚ such as NL Industry‚ mainly used sulfate process‚ which require lowgrade feedstock and produce a large amount of waste. This process will cost the
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Business Finance Q: Please compare the advantages and disadvantages of the following investment rules: Net Present Value (NPV)‚ Payback Period‚ Discounted Payback Period‚ Internal Rate of Return (IRR) and Profitability Index (PI). (You can start by considering the following questions for each investment rule: Does it use cash flows or accounting earnings? Does it consider all cash flows or not? Does it apply a proper discount rate? Whether the acceptance criteria are clear and reasonable? In what
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the options against variances in inflation of costs at 2%‚ 7% and 10%. This analysis showed that the available options are not sensitive to cost changes. NPV and IRR remains’ positive for all options of sensitivity analysis. Table 1. Sensitivity analysis (000 ’s) 2% (-2%) 4% 7% (+3%) 10% (6%) NPV IRR NPV IRR NPV IRR NPV IRR Gas $3‚302.70 34% $3‚772.49 35% $4‚577.42 38% $5‚521.53 40% Battery $2‚574.25 28% $3‚004.41 30% $2‚574.25 32% $4‚605.90 35% Bio Diesel $2‚812
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