Harris Case Analysis Objective: Should Harris invest into the shrimp processing plant? Issues: 1. Will this processing plant have a value today that is greater than or equal to the cost today? -If the NPV of the plant is greater than zero‚ then we should move forward with the investment. NPV Analysis: Value> Cost Value: PV: Value right now PV= forecast of future cash returns (FCR) -We used FCR to determine how much cash we get back and can deem the plan a good investment if we can bring
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Pinkerton Group Project Executive Overview The security guard services industry consisted of two segments: proprietary guards and contract guards. The historical growth was driven by companies realizing‚ that contracting guards allowed them gain operating flexibility instead of managing their own security personnel. In 1987 security guard services was a $10 billion industry growing at 6% a year. Due to the industry being very mature‚ fragmented‚ and price competitive there was an ongoing
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implements the suggested methodology‚ what will be the adjusted discount rate for the Red Oak project (USA) and the Lal Plr project (Pakistan)? Question 3 Calculate the effect that a revision of its cost of capital will have on the Lal Plr project’s NPV. Comment on the results. Case 3: Globalizing the Cost of Capital and Capital Budgeting at AES Q.1 At the AES corporation capital budgeting was historically a very simple method‚ that was used for all projects being examined‚ regardless of
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Assuming that this project is new information and is independent of other expectations about the company‚ calculate the effect of the new equipment on the value of the company and the effect on company’s stock price. Solution: NPV of the new printing equipment project = $750 million - $500 million = $250 million. Value of company prior to new equipment project=100 million shares x $45 per share = $4.5 billion.
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horizon‚ and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives? During the period of 5 years (from 1994 to 1998)‚ if the discount rate is 20%‚ Waltham plant is the only one that has a positive amount in NPV. The total net present value of this plant is approximately $6.4 million‚ while the other two plants have a negative number (Santa Clara: negative $3‚882‚499; Greenfield: negative $29‚386‚827). The reason is that the cost to conduct the three plans
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Scenario Analysis ------------------------------------------------- Year | ------------------------------------------------- Scenario 1 | ------------------------------------------------- Scenario 2 | ------------------------------------------------- Scenario 3 | ------------------------------------------------- | ------------------------------------------------- 15% Better | ------------------------------------------------- Stated Forecast | -------------------------------------------------
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years and the warehouse‚ over 25 years * In Y0‚ United Metals purchased new machinery for $45‚000 This purchase will not be taken into account for the calculation of the NPV because it was made in Y0 (it is thus a past cost)‚ we will solely include present or future cash flows * Corporate tax is 35% I- THE MAKE NPV Manufacturing Costs If United Metals decides to produce the components itself‚ total direct manufacturing costs will be $50‚000 plus $40‚000 of raw materials each year
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Bernard’s value of original opportunity was $68.465K. Subtracted by the initial investment of $90K‚ the NPV was $21.535K. Thus‚ he planned to pass the opportunity. But his friends offered him alternatives which may generate positive outcomes to the project. With no options to either expand or buyout or both‚ if the viewer would be functional and website would be a winner‚ Bernard could make NPV= $366.44K by selling the business in six months. If the viewer were competitively functional in four months
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calculating multiple NPVs for multiple inflationary rates for labor cost and supply cost would further confuse the issue. The information presented the NPV‚ IRR‚ MIRR and payback times would be calculated and discussed. Additionally‚ a break even point would be calculated. The break even point calculation included in fixed cost would
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Notes: FIN 303 Spring 09‚ Part 7 – Capital Budgeting Professor James P. Dow‚ Jr. Part 7. Capital Budgeting What is Capital Budgeting? Nancy Garcia and Digital Solutions Digital Solutions‚ a software development house‚ is considering a number of new projects‚ including a joint venture with another company. Digital Solutions would provide the software expertise to do the development‚ while the other company‚ American Financial Consultants (AFC) would be responsible for the marketing.
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