Warf Cash Flow Maureen Steinwall‚ PhD Walden University Warf Cash Flow This assignment is looking for the student to demonstrate competencies in cash flow analysis. The process of calculating cash flow is practiced; in addition‚ a critical thinking element is introduced. A successful assignment will present the cash flow calculations and discussion using APA formatting. Financial Statement of Cash Flows A financial statement of cash flows starts with the earnings before interest
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The Assistant Manager believed that the production line of EPC‚ a product Victoria was the leading supplier‚ should be renovated as well. Question & answer 1. What changes‚ if any‚ should Lucy Morris ask Frank Greystock make in his discounted cash flow (DCF) analysis? Why? What should Morris prepared to say to the Transport Division‚ the director of sales‚ her assistant plant manager‚ and the analyst from the Treasury Staff? We think the best way is to exclude sunk cost‚ change the
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projects. Projects are managed concurrently under a single umbrella and may be either related or independent of one another. 1. Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (discounted cash flows). How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems? Some measures that allow us to screen projects may lead to the wrong conclusions; for example‚ suppose that we selected
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outcomes to obtaining the goals and objectives. Pan Europa needs to rely on their project managers in order to successfully implement these projects and full support from top management is of essence. 2. Below are the projects ranked as per each discounted cash flow model: NPV (WACC) 47.97 11.99 9.00 8.95 5.21 1.16 0.99 0.28 -0.87 -1.92 NPV (ROR) 41.43 9.90 7.31 7.08 3.88 1.87 1.78 0.55 0.32 -0.13 Eq. Annuity 7.33 1.75 1.29 1.25 0.69 0.69 0.30 0.09 0.06 -0.02 Rank Project 1 2 3 4 5 6 7 8 9 10 11 7 8
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UV2493 Version 1.5 DIAMOND CHEMICALS PLC (A): THE MERSEYSIDE PROJECT Late one afternoon in January 2001‚ Frank Greystock told Lucy Morris‚ “No one seems satisfied with the analysis so far‚ but the suggested changes could kill the project. If solid projects like this can’t swim past the corporate piranhas‚ the company will never modernize.” Morris was plant manager of Diamond Chemicals’ Merseyside Works in Liverpool‚ England. Her controller‚ Frank Greystock‚ was discussing a capital project that
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income statement‚ the balance sheet‚ and the statements of cash flow. The income statement is made for measuring the profitability of a firm over period of time. Inform how revenue is transformed into net income and show whether the company made or lost money during this time. Income statement should help investors and creditors determine the past performance‚ predict the future performance and assess the capability of generating future cash flows. That information and other non financial data (like the
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development of competing synthetic-rubber compounds over the past five years SUMMARY • • • • The Merseyside project would be in the engineeringefficiency category : Impact on earning per share = had to be positive. Payback = maximum six years. Discounted cash flow = had to be positive. Internal rate of return had to be greater than 10%.
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outstanding EPS show a steady increase over the past five years indicating that Stanley is achieving hisgoal of maximizing profits. c. Operating Cash Flow (OCF) for 2012OCF = {Earnings Before Interest and Taxes×(1– Tax rate)} + Depreciation OCF = {EBIT × (1– T)} + Depreciation = {$89 000 × (1 – 0.20)} + $11 000 = $82 200 Free Cash Flow (FCF) for 2012 FCF = OCF1– Net Fixed Assets Investments – Net Current Assets Investment FCF = OCF – NFAI – NCAI NFAI = Change in net fixed assets
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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 any increase in interest expense related to the firms decision regarded on how to finance the project is a separate decision. Capital budging using incremental cash flow is
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(sufficient cash flow to service the obligation)‚ capital (net worth)‚ collateral (assets to secure the debt)‚ and conditions (of the borrower and the overall economy). Five C ’s of Credit (5 C ’s of Banking) www.wikicfo.com¶ 1. Cash Flow 2. Collateral 3. Capital 4. Character 5. Conditions The “5 C’s of credit” or "5C ’s of banking" are a common reference to the major elements of a banker’s analysis when considering a request for a loan. Namely‚ these are Cash Flow‚ Collateral
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