Chapter 10 Question 1 Marks: 1 Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC)? Choose one answer. | a. Long-term debt. | | | b. Accounts payable. | | | c. Retained earnings. | | | d. Common stock. | | | e. Preferred stock. | | Correct Marks for this submission: 1/1. Question 2 Marks: 1 For a typical firm‚ which of the following sequences is CORRECT? All rates are after taxes‚ and assume the firm operates at its
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different types of methods to determine its capital budgeting proposed projects. They include Earnings per Share (EPS)‚ Pay Back Period (PBP)‚ NPV‚ and the Internal Rate of Return (IRR). Of the four methods‚ the two favorable to use for evaluation would be NPV and IRR while the EPS and PBP would be less favorable to use because of its evaluation process. Using NPV is a good method to use to evaluate the project because it takes in account for all the costs relevant to the project and includes all the
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12.40% 6.20% Debt (Bonds and other debt) 0.40 6.20% 2.48% TOTAL: 9.48% The WAAC rate is 9.48%. B.) 1. Net Present Value method is one of the methods used in capital budgeting. The NPV is based on the discontinued cash flow. A company that has a proposal for a new project or an investment uses the NPV method to decide if they should accept it or move on with a different investment. This method provides valuable information to the management about the cash outflows related to the investment
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inventory‚ reduced inventory levels‚ more accurate tracking of inventory‚ and space savings (Wikipedia‚ 2014). VIA Consulting is going to help CanGo to calculate the costs of the new ASRS system. Utilizing tools like net present value (NPV) and internal rate of return (IRR)‚ we will examine and evaluate if the investment will benefit economically the organization. The cost for a new ASRS system is approximately of $2‚000‚000
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percent. The ranking of projects differs‚ depending on the use of IRR or NPV measures. Which project should be selected? Why is the IRR ranking misleading? Using the IRR method will result in project Q being selected over P due to its higher rate of return. Using the NPV method would result in choosing project P because of its higher NPV. When there are mutually exclusive project‚ NPV method would be preferred. IRR is misleading because it ignores the absolute amount from the wealth of
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FIN370 WK3 Solutions Guide: 1. We focus on free cash flows rather than accounting profits because these are the flows that the firm receives and can reinvest. Only by examining cash flows are we able to correctly analyze the timing of the benefit or cost. Also‚ we are only interested in these cash flows on an after tax basis as only those flows are available to the shareholder. In addition‚ it is only the incremental cash flows that interest us‚ because‚ looking at the project from the point
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D. 1. 2. 3. 4. 5. 6. INVESTMENT APPRAISAL The nature of investment decisions and the appraisal process Non-discounted cash flow techniques Discounted cash flow techniques Allowing for inflation and taxation in DCF Adjusting for risk and uncertainty in investment appraisal Specific investment decisions (lease or buy; asset replacement‚ capital rationing) The Nature of Investment Decisions and the Appraisal Process What is an investment? An investment is any expenditure in the expectation of
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E.I du Pont de Nemours & Co.: Titanium Dioxide Group#: 7 Lu Yu Yang Hu You Wang 1 1. There are basically three technologies to produce TiO2: sulfate process‚ rutile chloride process and ilmenite chloride process. Most of Du Pont’s competitors‚ such as NL Industry‚ mainly used sulfate process‚ which require lowgrade feedstock and produce a large amount of waste. This process will cost the
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1) How much importance should be given to the energy cost situation? Michael Burton’s proposal to expand into new energy efficient products is justified by increasing interest in the public and private sectors to reduce energy costs. At the highest level of government‚ the Obama administration has tied the US economy’s energy policy with its future success and competitiveness with other global powers. In a speech on June 2009‚ President Obama specifically mentions the Energy Department’s plans to
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855.29 ! ! ! C5-q11 A:(1)IRR(DF):$-750000+$310000/(1+r)+$430000(1+r)^2+ $330000(1+r)^3=0 r=19.8253% IRR(SR)=$-2100000+$1200000/(1+r)+$760000(1+r)^2+$850000/ (1+r)^3=0 r=17.3641% since r1>r2 project deepwater fishing should be chosen. (2)incremental cash flow: initial investment: -$1350000 year1:$890000 year2:$330000 year3: $520000 IRR : $-1350000+$890000/(1+r)+$330000/(1+r)^2+$520000/(1+r)^3=0 r=15.76% since 15.76%>14% ‚ project submarine ride should be chosen. (3)NPV(df)=$-750000+$310000/(1+14%)+$430000/(1+14%)^2+
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