Depreciation in span classtab/span 15 yearsspan classtab/span span classtab/span span classtab/spanbr / Rate @ cost of capitalspan classtab/span 12span classtab/span span classtab/span span classtab/spanbr / br / A Objective Compute payback‚ NPV and IRR to decide whether Rainbow Products should purchase the machine or
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15 NPV= -35‚000 + Σ 5‚000 / ( 1 + 12%)^ 15 i=1 NPV = $- 947. 67 Computation of the IRR : 15 0= -35‚000 + Σ 5‚000 / ( 1 + IRR)^ 15 i=1 IRR= 11.49% The NPV of this project is negative and the IRR is lower then the Cost of Capital (12%) Rainbow products shouldn’t go for it. (B) Based on the perpetuity formula we can compute the PV in this
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__________. 4) The capital budgeting process can be broken down into five steps. These steps include which of the following? 5) Projects can be classified into various categories. These include: 6) Boeing Corporation is a world leader in commercial aircraft. In the face of competition‚ Boeing often faces a critical decision: whether to develop a new generation of passenger aircraft. 7) A firm cannot simply adopt the industry average debt ratio‚ because differences exist among firms in any
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Strategic Decision of Boing Vs Airbus A Case Study Document Nr. V170506 http://www.grin.com/ ISBN 978-3-640-89394-2 9 783640 893942 ‘Case Study – How the Macroeconomic Environment of the Airlines Industry Affects the Strategic Decision of Boeing Vs Airbus’ By Christian Uwagwuna Course: Strategic Management 27 January 2011 Executive Summary This paper discusses the external economic factors affecting the strategic decision of airline industry and how this decision in turn‚ affect
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now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3‚000‚000. 1. What is the project’s IRR? (10 pts) 2. What is the project’s NPV? (15 pts) 3. Should the company accept this project and why (or why not)? (5 pts) 4. Explain how depreciation will affect the present value of the project. (10 pts) 5. Provide examples
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alternate products they offer at their online store as well as affiliates. Barnes & Noble has no such revenue stream. This means their cash cycle is shorter compared to a Amazon.com‚ who has become a major player in the Ebook market. Q2. How does Boeing achieve a cash cycle of negative 100 days? Negative Cash Cycles-The lower the cash cycle the better it looks for a company’s finances‚ so a negative cash cycle is very desirable. A negative cash cycle is one in which you don’t pay for your inventory
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Study questions: These questions are intended to get you started on your analysis and to focus your attention on a few critical points. They are not necessarily the final goal of your analysis. Oracle Systems: 1. TYPO: The two quarterly figures‚ $230‚187 and $174‚673‚ listed as “General and admin” in Exhibit 1 should be listed as “Total operating expenses”. 2. NOTE: Exhibit 6 presents common-sized financials for the industry‚ not Oracle systems. 3. On a scale of 1 to 100‚ rate the financial
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Assuming that the required rate of return is 15% and the initial cost of the machine is $3‚000‚000. Required rate of return 15% Year Cash Flow 0 $ (3‚000‚000) 1 $ 1‚100‚000 2 $ 1‚450‚000 3 $ 1‚300‚000 4 $ 950‚000 1. What is the project’s IRR? (10 pts) = 22.38% 2. What is the project’s NPV? (15 pts) = $450‚867.00 Computation of Net Present Value Year Cash Flow Present Factor @ 15% Present Value 1 $ 1‚100‚000 0.8696 $ 956‚522. 2 $ 1‚450‚000 0.7561 $1‚096‚408. 3 $ 1‚300‚000 0.6575
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business and current position of Qantas Airways‚ and then moves on to SWOT analysis to discuss the external and internal environments in order to identify this optimal strategy. The proposed growth strategy comes out with a positive NPV and a higher IRR. Based on the optimal debt-equity structure of Qantas‚ new ordinary shares are proposed to issue in order to finance this joint venture. The forecasted income statements and balance sheet both show positive more outcomes from this project. The report
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definitive can be said. For discount rates greater than zero‚ the payback period will still be less than the project’s life‚ but the NPV may be positive‚ zero‚ or negative‚ depending on whether the discount rate is less than‚ equal to‚ or greater than the IRR. The discounted payback includes the effect of the relevant discount rate. If a project’s discounted payback period is less than the project’s life‚ it must be the case that NPV is positive. Assuming conventional cash flows‚ if a project has a positive
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