HARDING PLASTIC MOLDING COMPANY On January 11‚ 1975‚ the finance committee of Harding Plastic Molding Company (HPMC) met to consider eight capital budgeting projects. Present at the meeting were Robert L. Harding‚ President and founder‚ Susan Jorgensen‚ comptroller‚ and Chris Woelk‚ head of research & development. Over the past five years this committee has met every month to consider and make final judgment on all proposed capital outlays brought up for review during the period. Harding
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WACC will change both the NPV and the IRR. To find the MIRR‚ we first compound cash flows at the regular IRR to find the TV‚ and then we discount the TV at the WACC to find the PV. The NPV and IRR methods both assume that cash flows can be reinvested at the WACC. However‚ the MIRR method assumes reinvestment at the MIRR itself. If two projects have the same cost‚ and if their NPV profiles cross in the upper right quadrant‚ then the project with the higher IRR probably has more of its cash flows
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The Millegan Creek Apartment case is an example of a commercial loan. The parties involved in the commercial loan are JP Multifamily Inc. and Fleet Bank. Real Estate group at Fleet Bank want to find out whether or not to accept JPI’s proposed $15‚715‚000 loan for a 390-unit apartment project in Austin‚ Texas. The details about the each party‚ market and financial analysis of the project is outlined below. THE BORROWER -JP MULTIFAMILY INC. The Development Expertise JPI Multifamily Inc.(JPI)
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Re: Seagate Technology 1. Describe the main terms of the Seagate Technology buyout? Why is Seagate undertaking this transaction? Is it necessary to divest the Veritas shares in a separate transaction? What are other alternative ways to create value? The primary contemplated terms would be to sell Seagate’s disk drive mfg assets including $765M in cash to Suez Acquisition Company controlled by Silver Lake Partners. The purchase would be financed by equity put up by Silver Lake and also by an‚
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analysis of the various alternative proposals regarding a capital expenditure and to select the best out of the several alternatives. There are several methods of evaluating investment projects like NPV‚ IRR‚ Payback period and Profitability Index (www.investopedia.com). I will be discussing NPV and IRR for this assignment. Net Present Value (NPV) NPV is a method which uses discounted cash flow techniques. Net Present Value is equal to the difference between the Present Value (PV) of the future
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worth was tied up in Peabody. These figures gave a weighted average cost of capital of 9.70%. The IRR for this purchased was calculated by using $621.5 million as the initial investment. This figure was determined as a result of Kennecott giving Peabody $285 million in cash‚ assuming $36.5 million in liabilities‚ and taking on a reserved payment of $300 million. Also‚ the figures used to determine IRR came from the figures given under cash flow from
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Chapter 12 Analyzing Project Cash Flows 12-1. Captain’s Cereal’s new Crunch Stuff n’ Stars is expected to generate $25M in sales. However‚ 20% of that will be cannibalized from the original cereal‚ Crunch Stuff. Thus‚ the sales amount that should be allocated to the new Stars version is only (100% − 20%) of the $25M‚ or $20M. This is an example of finding an “incremental” cash flow. As shown in equation 12-1‚ we only want to consider what is different if we go ahead with the project: incremental
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Speed Economy High Speed Rail will be equivalent to throwing government subsidies into a black hole – crushes the US economy Utt‚ Ph. D. & Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation‚ February 11‚ 2011 Advocates for more spending on passenger rail‚ including HSR‚ often point to Europe and Japan as role models and aspirational goals for American policy. This Euro-envy manifests itself in the promotional
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Pay Back Period (PBP) PBP < target period PBP >target period Accounting Rate of Return (ARR) ARR > target rate ARR < target rate Discounting criteria Accept Reject Net Present Value (NPV) NPV > 0 NPV < 0 Internal Rate of Return (IRR) IRR > cost of capital IRR < cost of capital Benefit- Cost Ratio (BCR) BCR >1 BCR < 1 Implementation The implementation phase for an industrial project‚ which involves the setting up of manufacturing facilities‚ consists of several stages: I
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Capital Budgeting Decision Process 1. Introduction The maximization of shareholder wealth can be achieved through dividend policy and increasing share price of the mark value. In order to derive more profits‚ our company shall invest potential investments which always cover a number of years. Those investments involve substantial initial outlay at the outset and the process. The management is responsible to participate in the process of planning‚ analyzing‚ evaluating‚ selecting
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