project or not. Six issues will be discussed as follows 1) importance of energy cost; 2) project’s cash flows; 3) cost of capital; 4) choose an engine 5) evaluation 6) accept or reject. We should accept the project because of the positive NPV and high IRR. We will gain $532 million in wealth which is a big money on the scale like this. The company has a bond rating of AA that makes the risk relatively low. So we should definitely say yes. Issues Importance of Energy Cost Road King Trucks‚ Inc. is
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equity joint venture in the city of Changchun.This proposal would be one of the first two green field equity joint venture with PepsiCo having control over both the board and day-today managmenet. PepsiCo uses capital budgeting tools such as NPV and IRR to systematically evaluate their investment project. Using this evaluation method Mr Hawaux‚ vice president of Finance for PepsiCo East Asia‚ was wondering whether this project would be profitable and if PepsiCo should proceed with the Changchun Joint
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TO: General Manager of Phuket Beach Hotel RE: Investment Consultation: Planet Karaoke Pub Vs. Beach Karaoke The Phuket Beach Hotel faces development options in its future. Planet Karaoke Pub‚ a restaurant chain‚ has approached the hotel to obtain a 4 year lease to occupy a 3‚000 square foot space. Should the Phuket Beach Hotel invest in Planet Karaoke’s proposal? Or‚ should the hotel develop its own karaoke business? Kornkrit and Wanida believe Group 3 is the most equipped to handle the analysis
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Chapter 10 Question 1 Marks: 1 Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC)? Choose one answer. | a. Long-term debt. | | | b. Accounts payable. | | | c. Retained earnings. | | | d. Common stock. | | | e. Preferred stock. | | Correct Marks for this submission: 1/1. Question 2 Marks: 1 For a typical firm‚ which of the following sequences is CORRECT? All rates are after taxes‚ and assume the firm operates at its
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BACKGROUND As the world’s largest aerospace company and leading manufacturer of commercial jetliners and defense‚ space and security system‚ Boeing puts a lot of efforts and innovations in its products and services. These include commercial and military aircraft‚ satellites‚ weapons‚ electronic information and communication systems‚ and performance-based logistics and training. Due to customers’ needs and requests‚ Boeing has expanded its product line and services. The long tradition
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capital | 12% | | | A: Objective: Compute payback‚ NPV and IRR to decide whether Rainbow Products should purchase the machine or not. i) Bay back: cost of machine/expected saving per year = 35000/5000 = 7 years . ii) NPV = Difference between the present value of cash inflows and the present value of cash outflows. Thus‚ NPV = -35000 + 5000* [1-(1/(1.12)^15]/.12 -35000 + 34053.31 NPV = -945.68 iii) IRR: It is that rate of interest that makes the sum of all cash flows
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believe it is necessary to ensure the evaluation method to be adopted for the future projects evaluation. So far‚ Metalcrafters’ board members were using 3 different methods to evaluate the projects. The three methods are internal rate of returns (IRR)‚ net present
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Financial Management Assignment - A Question 1a: Should the titles of controller and treasurer be adopted under Indian context? Would you like to modify their functions in view of the company practice in India? Justify your opinion? Answer to 1a: Controller & Treasurer are independent & they have their own Perspectives & Drivers as detailed below: Controller Responsibilities include‚ Double entry accounting‚ financial reporting‚ Fraud measure‚ detective controls‚ Financial restatement‚ Compliance
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D. 1. 2. 3. 4. 5. 6. INVESTMENT APPRAISAL The nature of investment decisions and the appraisal process Non-discounted cash flow techniques Discounted cash flow techniques Allowing for inflation and taxation in DCF Adjusting for risk and uncertainty in investment appraisal Specific investment decisions (lease or buy; asset replacement‚ capital rationing) The Nature of Investment Decisions and the Appraisal Process What is an investment? An investment is any expenditure in the expectation of
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approximation In( 1 +‚ ) ~ ‚ - !/2‚ show that lor‚ ~ 08 there holds 11 ~ 72/i 3. (Effective nltes) Find the corresponding effective rates for: (a) 3% cOnlpounded monthly (b) 18% compounded monlhly (t) 18% compounded quarterly 4. (Newton ’s method 0) The IRR is generally calculated using an iterMive procedure Sup~ pose that we define I (A) = -ao + {{I A+ 02A 2 + + {{nAil‚ where all {{I ’ S arc positive and 11 > I Hefe is an iterative technique that generates a sequence AO‚ AI ’ A2. ‚Ak‚ ot estimates that
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