Valuing Capital Investment Projects 1. Growth Enterprises‚ Inc. (GEI) has $40 million that it can invest in any or all of the four capital investment projects‚ which have cash flows as shown in Table 1 below. Table 1 Comparison of Project Cash Flows* ($ thousands) Year of Cash Flow Project A. B. C. D. Type of Cash Flow Year 0 Investment Revenue Operating expenses ($10‚000) Investment Revenue Operating expenses ($10‚000) Investment Revenue Operating expenses ($10‚000) Investment Revenue
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MANAGEMENT WEEK 2 - 3 TOPIC - CAPITAL INVESTMENT ANALYSIS AND INFLATION AND CAPITAL INVESTMENT ANALYSIS WITH TAXATION OBJECTIVE At the end of this lecture‚ the students should be able to: 1. Explain the nature of inflation 2. Distinguish between money cash flow and real cash flow 3. Distinguish between money and real discount rates 4. Compute impact of inflation on discounted cash flow. 5. Explain investment incentives - capital allowance‚ annual allowance initial
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CASE 2: VALUING CAPITAL INVESTMENT PROJECTS CORPORATE FINANCE GROUP Y Growth Enterprises‚ Inc When valuing any project‚ the free cash flows must be determined in order to be able to successfully implement any method of capital budgeting. Growth Enterprises is currently considering four projects. Each has an equal required initial investment of $10‚000‚000 which is followed by a set of cash flows different for each project. Depreciation figures for each project were calculated on a straight-line
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Chapter 6 Capital investment:regardless of whether they involve a tangible or intangiable asset. The incestment creates wealth if the discounted value of the future cash flow exceeds the up front cost. The problem is what to discount- stick to these rules: 1. Only cash flow is relevant. Net present value depends on future cash flows it’s the difference between cash received and cash paid out. Cash should be recorded only when they occur and not when work is undertaken or a liability is incurred
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creativity in identifying and developing options‚ for which the 1. Brainstorming technique is particularly useful. See also the free SWOT analysis template and examples‚ and 2. PEST analysis template‚ which help decision-making and problem-solving. 3. SWOT analysis helps assess the strength of a company‚ a business proposition or idea; PEST analysis helps to assess the potential and suitability of a market. Good decision-making requires a mixture of skills: creative development and identification
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Capital Investment Decision Strayer University Graduate Accounting Capstone ACC-599 September 28‚ 2013 Professor: Dr. Mary Johnson Abstract The Dodd-Frank Wall Street Reform and Consumer Protection Act‚ signed into legislation in July of 2010‚ by President Barack Obama‚ as a result of the financial crisis that began in 2008‚ which resulted in massive failure of large financial institutions‚ threatening the financial stability of the U.S.‚ as well as the global economy (Dodd‚ C.
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TOPIC: Chapter 9 - Advanced Topics in Capital Investment Analysis INFLATION AND CAPITAL BUDGETING Inflation – is the increase in the general level of prices for all goods and services in an economy. Inflation and Opportunity Cost of Capital o Risk Premium - risky investments must provide an investor with the potential for larger returns to warrant the risks of the investment. o Risk-free Rate - is the minimum return expected by providers of capital compensation for inflation and waiting
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REPORT ON PROJECT EVALUATION FOR KALAHI-CIDSS PROJECT‚ PHILIPPINES Introduction This report considers the following project evaluation methodologies in the context of the KALAHI – Comprehensive and Integrated Delivery of Social Services (CIDSS) Project in the Philippines (“the Project”): (a) financial analysis; (b) economic analysis; (c) social cost benefit analysis; (d) other evaluation methods including willingness to pay‚ planning balance sheet and cost effectiveness analysis. In order
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Evaluate the different methods of capital investment appraisal available to organisations and clearly show when each method would be used (if at all) illustrating your answer with relevant examples. Capital investment appraisal can be described as the decision-making process used by organisations to evaluate different investments and to decide which fixed assets to purchase. In the following‚ four different methods of investment appraisal shall be discussed: accounting rate of return (ARR)‚ payback
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Initial Capital Investment Before investing any amount of capital into a business‚ organisation or idea‚ It is crucial that research is conducted into the market and the market share of the business. From this‚ an estimation can be gained if it is a wise idea and what the possible return maybe. The initial capital investment must be sufficient to cover all costs of the setting up‚ opening and running of the business until the business is making enough income from sales and services to aide or
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