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 of 12 percent‚ what is the NPV of the new truck? Use the Depreciation schedule listed below: (5-Year depreciation Schedule: 20%‚ 32%‚ 19%‚ 12%‚ 12%‚ 5%) Answer: Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
Premium Net present value Depreciation
Table of contents: Page no. 1. Introduction 1 2. Investment appraisal 2 3. Payback method 3 4. Present value (PV)‚ future value (FV) and net present value (NPV) 5 5. Project 1 6 6. Comparing projects 11 7. Conclusion 12 8. References 13 9. Bibliography 14 Introduction: In 21st century business is much more developed and competitive as well with the presence of so many competitors
Premium Net present value Discounted cash flow Cash flow
In order for everyone to have knowledge of what is about to take place in the upcoming weeks I will be defining and explaining some very vital information on Net Present Value (NPV)‚ the Internal Rate of Return (IRR) so that these methodologies could be used effectively throughout the company. Net Present Value (NPV) The basic definition for the net present value is the capital budgeting to see how successful a company or organization is. This particular technique is really used to make certain
Premium Net present value Cash flow Investment
(A) The payback is 35‚000/5‚000= 7 years Computation of the NPV : 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
Premium Net present value Cash flow 1967
independent and mutually exclusive projects? Between projects with normal and nonnormal cash flows? C. (1) Define the term net present value (NPV). What is each project’s NPV? C. (2) What is the rationale behind the NPV method? According to NPV‚ which project(s) should be accepted if they are independent? Mutually exclusive? C. (3) Would the NPVs change if the WACC changed? Explain. D. (1) Define the term internal rate of return
Premium Net present value Internal rate of return
equipment or a building. IRR The higher a projects internal rate of return‚ the more desirable it is to invest in the project. Some ways to use the IRR method are: • Discounted Cash Flow Analysis - Find the interest rate return that you would receive as your investment return rate. • Capital Budget Planning - Go through the capital budget process so that you make the best economic decision. • Discounted Cash Flow Analysis - When you calculate IRR you will have one number for
Premium
$ 5‚100 2. What is the project ’s NPV? The Net Present Value is $36‚955.09 Explain the economic rationale behind the NPV. Economists found much of their analyses on a marketplace where supply and demand are based on the perceptions of present value and scarcity. The Net Present Value (NPV) are calculations used to estimate the value over a lifetime which in this case would be of Chicago Valve ’s standard petroleum valve systems. NPV allows decision makers to compare various alternatives
Premium Net present value Investment Capital budgeting
Case 20: PEPSICO CHANGCHUN JOINT VENTURE Capital Expenditure Analysis Study Questions Q1. Use the information in the case to construct two sets of NPV and IRR analysis from joint venture view and Pepsico. Based on the results‚ what would be your decision on the proposed Changchun joint venture? Q2. Comment on the financial projections that PepsiCo used in its capital budgeting exercise‚ especially the NOPBT Cap‚ foreign exchange rate projection and the discount rate. Q3. What differences might
Premium Net present value Internal rate of return Cash flow
Evaluate the proposal In order to evaluate the aircraft proposal we need to calculate the NPV and IRR of both the Aircraft purchasing and leasing option. Investment decisions determine the future cash flows of a company and expected future cash flows determine the value of a company. In order to calculate the NPV we first needed to get a cost of capital. We calculated the Weighted Average Cost of Capital in order to measure the firm’s cost of capital. When calculating the WACC for the Aircraft
Premium Net present value
capital and investment to company expenditure which facilitates the determination of the concerned firm ’s investments. Doubtlessly‚ firms will benefit from modern financial technology. The most common ways of investment appraisal are payback‚ IRR and NPV methods; each of them has its own strengths and weaknesses from a perspective of decision making. In this essay‚ the background and methods of capital investment appraisal will be discussed‚ and then will argue the comparison of different methods
Premium Net present value Investment