inance COOPERATE FINANCE | Miss Afifa | | Assignment# 4 | | UMAIR ASIF11 March 2013 | You submitted this Assignment on Sun 10 Mar 2013 7:21 PM PDT. You got a score of 85.00 out of 100.00. You can attempt again‚ if you ’d like. Top of Form Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $‚ %‚ commas‚ etc.). Enter all dollars without decimals and all interest rates in percentage with
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discounted cash flow technique in which present value of an investment’s future cash inflows divided by its initial cash outflow. It is also called benefit/cost ratio. PI = PV of cash inflows / PV of cash outflows If PI is positive‚ it will be accepted otherwise reject. 3) Internal rate of return: IRR is the discount rate that equates the present values of cash inflows with the initial investment associated with the project thereby causing NPV = 0 If IRR ≥ required rate of return the
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Table Sketch of Cash Flows at End of Year 0 1 2 3 4 3.1699 $6‚340 $2‚000 $2‚000 $2‚000 $2‚000 1.0000 (5‚827) $(5‚827) $ 513 Approach 1: Cash flows Annual savings 2‚000 2‚000 2‚000 2‚000 Annual Savings Initial Outlay Net present value Present value of Future inflows Initial Outlay 1.0000 Net present value $6‚340 (5‚827) $(5‚827) $ 513 Assumptions of the NPV model Decision rules Managers determine the sum of the present values of all expected cash flows from the project. There
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its projects. Their minimum payback period is 2.5 years. Assuming the projects are independent (not mutually exclusive)‚ which would you choose based on the payback method? The NPV? The IRR? Project A Project B Initial outlay $200‚000 Initial outlay $180‚000 Cash flows Year 1 $70‚000 Year 1 $80‚000 Year 2 $80‚000 Year 2 $90‚000 Year 3 $90‚000 Year 3 $30‚000
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project can be made independently of the financing costs. Questions 2 through 11 relate to the initial decision of adding the second pasta machine: Question 2 What is Prairie Winds Pasta’s Year 0 net investment outlay for the new pasta equipment expansion project? (Hint: Use Table 1 as a guide) Response: |Net Investment | | | |Outlay: | | | |Equipment cost
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Capital Budgeting Methods for Corporate Project Selection In a 2001 Graham and Harvey survey of 392 chief financial officers (CFOs) asked “how frequently they used different capital budgeting methods?” Approximately 75% of the CFOs replied that they use net present value (NPV) or Internal Rate of Return (IRR) always or almost always (Smart‚ Megginson & Gitman‚ 2004‚ pg. 251). Projects are viewed as capital investments in the corporate world‚ and as such‚ are evaluated closely for their possible
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comparable recommendations? If not‚ why not? Soln: The net present value of a project is found by discounting the expected future net cash flows at the required rate of return and deducting‚ from the resulting present value‚ the project’s initial cash outlay. If the project has a positive net present value‚ it is acceptable. The internal rate of return of a project is the rate of return that results in a zero net present value. When cash flows are conventional‚ if projects are independent
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SCHOOL OF FINANCE AND APPLIED STATISTICS FINANCIAL MATHEMATICS (STAT 2032 / STAT 6046) TUTORIAL SOLUTIONS WEEK 8 Question 1 This question refers to two projects relating to a small software company that has asked to set up a new computer system for a major client. : Project A Project A delegates all the development work to outside companies. The estimated cashflows for Project A are (where brackets indicate expenditure): Beginning of year 1 Beginning of year 2 Beginning of year 3 End
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7 6.1 Design and Process 6.2 Human resource 6.3 Safety and health 7.Conclusion 9 8. Reference 10 1.Introduction Piper Alpha was a North Sea oil production platform operated by Occidental Petroleum (Caledonia) Ltd. The platform began the oil production in 1976‚ first oil platform in the world and then later converted to gas production[1]. The piper alpha platform was ran by day shift and night shift worker. Both of the shift was operate the whole platform
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consideration later. Initial Investment Initial investment also called as initial outlay is an immediate cash outflows that required by company to start a project. Calculation of initial investment is important to determine how much cost is needed to run a new project. The following are the calculation of initial investment that will be incur by ATLAM in the implementation of SAP as obtained in the case study: CASH OUTFLOWS: RM Hardware 2‚000‚000 Initial software license 1‚000‚000 Training
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