the information is so readily available. II. internal rate of return because the results are easy to communicate and understand. III. discounted payback because of its simplicity. IV. net present value because it is considered by many to be the best method of analysis. | | | Student Response | Value | A. | I and III only | | B. | II and III only | | C. | I‚ II‚ and IV only | 100% | D. | II‚ III‚ and IV only | | E. | I‚ II‚ III‚ and IV | | | | | 2. | |
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for future cash inflows from investing activities. D. exchange current cash inflows for future cash outflows. Risk & return 6. The higher the risk element in a project‚ the A. more attractive the investment is. B. higher the net present value is. C. higher the cost of capital is. D. higher the discount rate is. 9. Cost of capital is the A. amount the company must pay for its plant assets. B. dividends a company must pay on its equity securities. C. cost
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capital projects and| |identify the projects‚ which has the highest value adding to the company at the cost of capital. It uses net present value of | |future cash flows discounted at the appropriate cost of capital and compares it with initial investment and to see whether it | |is a positive net present value. If the present value is less than the initial investment then the project is rejected. That | |is the net present value is dependent on future cash flows.
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000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10‚000. Payback period =Cost of investment/ Annual net cash flow =$260‚000/ $125‚000 =2.08 years Annual depreciation = $260‚000 -$10‚000 / 5 = $50‚000 Annual after tax income $75‚000 + Depreciation 50‚000 Annual net cash flow $125‚000 2. A machine costs $190‚000‚ has a $10‚000 salvage value‚ is expected to last nine years‚ and will generate an after-tax income of $30‚000
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versus IRR 9 Conclusion 10 References 11 ABSTRACT This paper covers the implementation of three investment appraisal methods. Initially‚ importance of investment appraisal has been analyzed. Secondly‚ calculations have been done for Net present value‚ Payback period‚ Internal Rate of Return for two projects. Subsequently‚ selection of project has been done with assistance of results from calculations. After that‚ it has been discussed that how does change in cost of capital affect NPV and
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1: Maplewood Creations is considering the purchase of a new truck to replace an old truck that has a book value of $2‚500 and a market value of $800. The annual depreciation expense on the old truck was $500. The new truck‚ which will cost $29‚000‚ will reduce operating costs $9‚000 per year over it ’s 6 year economic life. The new truck has a 5-year MACRS life and an estimated salvage value at the end of 6 years of $2‚000. If Maplewood has a 40 percent marginal tax rate and a cost of capital
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corporate policy of scrapping a vessel after 15 years‚ even though such vessels have a product life of 25 years. Analysis In considering whether Ocean Carriers should purchase the new capsize carrier for the potential customer‚ we completed a net present value analysis of the ship. We utilized the given expected daily hire rate to calculate the revenue that could be expected over the lifetime of this vessel. We chose to use the expected daily hire rate because it most accurately represented Ocean
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Rate of Return (IRR) and Net Present Value (NPV) will be provided and debriefed. It is extremely relevant to mention that capital budgeting allows the companies to analyze one or more projects to decide eventually which project or piece of equipment would be most profitable or suitable (economically)‚ according to the needs and the capacities the company has. Before entering into the analysis a little further and into the company chosen let us define what Net Present Value really is. According
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and research development projects are worth pursuing. It is budget for major capital‚ or investment‚ expenditures. Many formal methods are used in capital budgeting‚ including the techniques such as 1. Accounting rate of return 2. Net present value 3. Profitability index 4. Internal rate of return 5. Modified internal rate of return 6. Equivalent annuity These methods use the incremental cash flows from each potential investment‚ or project. Techniques based on accounting
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Caladonia Products Integrative Problem Tonia Tolliver‚ Suany Gonzalez‚ Teresa Powell‚ Victor Estrada‚ and Tracy Harriss FIN/370 November 8th‚ 2010 Joe Brennan Caladonia Products Integrative Problem Every new employee is faced with the challenge of proving him or herself before being trusted to complete a task on his or her own without supervision. The new financial analyst at Caladonia has been employed for two months and has proven to be a wise hiring decision based on the Chief
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