discounting cash flows and the analysis of the NPV of both projects. An investment with a positive and high NPV is profitable investment and is more likely to me accepted by the company. A positive NPV means that the investment creates value and therefore the project generate enough cash flow to cover the cost and provide enough returns to the shareholders. In the case of a negative NPV‚ the investment should not be supported. Through a focus on NPV results of both projects we can conclude that the
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EBIT + Depreciation - Capex - WK FCF Wacc Enterprise Value + Terminal Value + working capital Total EV (31/12/1983) EV/EBITDA 1984 EV/EBITDA 1985 EV/EBITDA avg. Terminal Value Growth Capex = Depreciation Monticello Mill financials Revenues Annual Capacity Utilization rate Tons Price per ton EBITDA margin Box Plants financials Revenues EBTIDA margin Combined Package financials Revenues EBITDA margin Depreciation EBIT Auxiliar: Capex New Capex Auxiliar: Depreciation New Capex depreciation Old Asset
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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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COMPUTING NPV and IRR PCP Pj vs STATUS QUO STRYKER Case decrease in purchases from contract manufacturers less incremental Stryker manufacturing costs Operating income from project less architect and engineering fees pre-tax income less taxes at 36% After-tax income add back Building depreciation add back Equipment depreciation add back It & other equipment depreciation Subtotal plus NCW Savings Subtotal Cash Flow Terminal Value‚ at book value Hurdle rate Discount factor at 15% PV of Cash Flows Sum
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currently offered products. Or not to introduce the new product and lease out it’s space‚ or do nothing to save the space until it’s needed for its current product line. 1) Incremental cash flows are the cash flows that should be used in calculating the NPV of a project. The cash flows are changes in cash flows that occur as a direct consequence of accepting a project‚ not the cash flows that the company is already receiving. No we do not include interest expense in the capital budging process‚ because
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Guillermo Furniture Store University of Phoenix FIN 571/December 10‚ 2012 Marcel Santiz In week one‚ the author conducted an analysis on the Guillermo Furniture Store location‚ company finance‚ and the production of work. For this current week‚ the author will analysis some alternative for Guillermo Furniture Store working capital policy by implementing multiple valuation techniques with an emphasis on reducing business risks and comparing the average cost of capitol. In
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Mandatory investment- government regulated‚ safety material. NPV = PV of inflows – Cost= Net gain in wealth.. If projects are independent‚ accept if the project NPV > 0. If projects are mutually exclusive‚ accept projects with the highest positive NPV‚ those that add the most value. In this example‚ accept S if mutually exclusive (NPVS > NPVL)‚ and accept both if independent. [pic] [pic] [pic] [pic] Quiz Internal rate of return‚ IRR‚ will increase as the required rate of return of a project
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might the board vote ’yes’ on the 7E7‚ when the cost of capital estimate is greater than the IRR? Why might the board vote ’no’ if the cost of capital is less than the IRR? What should the board do? Introduction Ultimately Boeing needs to determine if the project will be profitable and if it will have positive cash flows in accordance with business requirements. Our analysis shows that the WACC‚ NPV and IRR are favorable (according to sensitivity analysis) and the project will likely be profitable
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If the firm’s cost of capital is 14 percent and its tax rate is 40 percent‚ what is the project’s IRR? IRR Financial calculator solution: Inputs: CF0 = -200000; CF1 = 44503; Nj = 10. Output: IRR = 18%. 4) St. John’s Paper is considering purchasing equipment today that has a depreciable cost of $1 million. The equipment will be depreciated on a MACRS 5-year basis‚ which
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rank competing investments. In this case‚ our group using some tools which are Payback Period‚ Net Present Value (NPV) ‚ Profitability Index (PI)‚ and Internal Rate of Return (IRR). We are only using quantitative considerations that we think to be relevant and no other project characteristics are deciding factors in our selection of the best four projects. Payback Period NPV PI IRR Sum of Cash Flow Benefits Excess of cash flow over initial investment Project 1 6 years 22 days $ 73.09 104%
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