(1+r)n Rule 3: To move a CF back in time you must discount it PV= C/ (1+r)n Valuing Streams of CF NPV= ∑Cn/ (1+r)n Perpetuity Stream of equal CF that last forever PV= C/r Annuity A stream of CF that occur at regular intervals for N periods Growing Perpetuities Stream of CF that occur at regular intervals and grow at a constant rate forever (growing dividend) NPV= C/ r – g g= growth rate Growing Annuities PV= C x (1/(r-g)) (1-((1+g)/(1+r))N What if g>r
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Case Study PAN EUROPA FOODS S.A C. Opitz and R.F. Bruner Table of Contents 1. Executive Summary 2. Problem Statement 3. Data Analysis 4. Alternative Analysis 5. Key Decisions Criteria 6. Recommendation 7. Action & Implementation Plan Executive Summary: The report summarizes Pan-Euorpa Food’s capital resource allocation budget for 1993 to present to stockholders. The board has presented 11 projects providing different needs and opportunities to grow the business. Exhibit
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Capital Budgeting Case Su Guan Fin316 4:00 PM 11/13/2014 Directions: Answer questions 1 – 6 and turn in a hard copy of your answers at the beginning of class on Thursday November 13th. No late submissions will be accepted. You will need to use Excel or Google sheets for most of the analysis. Please type answers to the questions in this word document and attach each spreadsheet as exhibits at the back. I am trying to replicate an exam experience as much as possible so I will not be answering individual
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Assignment | Cost of Capital‚ Capital Budgeting and Financial Planning | Chapter(s) | 9‚ 10‚ 12 | Group Name | | Student Name(s) | | Date | | Instructions: HW Assignments will be uploaded to Kean Blackboard and must be accessed from there. You must work in groups where assigned (or independently if not assigned to groups) on homework assignments. Points are noted against each question. You are required to submit Home Work assignments electronically on Kean Blackboard using MS-Office
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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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per acre)(acres) Sale preparation and administration = (Cost MBF) (MBF acre) (acres) It is assumed that there is no depreciation as a result of the harvest. This is an indicator that operating cash flow is equal to net income. The NPV of the thinning‚ the NPV of all future harvests‚ minus the present value of the conservation fund costs. Revenue $39‚800‚250 Tractor cost 7‚200‚000 Road 2‚700‚000 Sale preparation & admin 945‚000 Excavator piling 1‚200‚000 Broadcast burning 2‚287‚500
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CHAPTER 14 OPTIONS AND CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. A call option confers the right‚ without the obligation‚ to buy an asset at a given price on or before a given date. A put option confers the right‚ without the obligation‚ to sell an asset at a given price on or before a given date. You would buy a call option if you expect the price of the asset to increase. You would buy a put option if you expect the price of the asset to decrease. A
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6% and the current competitive exchange rate is €0.78 to $1.00. What is the NPV of this project? Would you take the project? A) NPV = 0; No B) NPV = 2‚358; No C) NPV = 2‚358; Yes D) NPV = 13‚650; Yes Answer: C Explanation: A) B) C) NPV = -250‚000 + (€208‚650 / 1.06) × $1.00 / €0.78 = 2358‚ so since NPV > 0‚ accept D) Diff: 3 Topic: 3.3 Present Value and the NPV Decision Rule Skill: Analytical Use the table for the question(s) below
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Corporate Finance Capital Budgeting Course Outline CAPITAL BUDGETING Course outline Key Principles in Capital Budgeting: Criteria for Investment Projects Net Pesent Value Internal Rate of Return Payback Profitability Index Finding Cash Flows Maria Ruiz 1 Financial Management Financial management is largely concerned with financing‚ dividend and investment decisions of the firm with some overall goal in mind. Corporate finance theory has developed around the goal of shareholder
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alternatives exist for organizations to make their capital budgeting (CB) decisions or the alternative projects can be ranked in line with the benefits arrived in terms of profitability and the revenue generated. (Gitman‚ 2008). Net present value (NPV)‚ internal rate of return (IRR)‚ accounting rate of return (ARR) and PBK are generally described as the most commonly used CBTs. The two former techniques are based on the cash-flow concept and are usually categorized as sophisticated techniques. Bierman
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