of capital – rate of return expected to be received from alternate investments forgone. NPV – Present value of cash flows less the cost of acquiring the asset acquire assets with positive NPV‚ positive NPV = good project Rate of Return = profit/cost or investment (good investments have higher rate of return than opportunity cost) Higher discount rate ( lower discount factor (lower NPV Investment Decision Rules: 1. accept if positive NPV 2. accept w rate of return > opp cost
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corporate finance (2010‚ P. 203-204). In order to determine if Bethesda Mine should open‚ a thorough analysis of the payback period‚ profitability index‚ average accounting return‚ net present value‚ internal rate of return‚ and the modified internal rate of return have been conducted. Table 1. Cash flow on Investment Tax rate= 38% Year 0 Cash flow (outflow) on investment Opportunity cost of using land= $7‚000‚000 Cost of equipment= $85‚000‚000 Total $92‚000‚000 Table 2. MACRS 7-Year
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be based on discounting cash flows analysis and thereafter determining the Net Present Value (NPV) of each of the proposed project with Internal Rate of Return (IRR)‚ Profitability Index and Payback Period. If the project has a positive NPV‚ it would suggests the project is generating more cash than is required to service the debt and provide the appropriate returns; thus‚ the higher NPV‚ the better it is for the company. The project proposal with the positive and highest NPV‚ IRR and profitability
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processing data. * Data - information pertinent to the organization’s business practices. * Software - computer programs used to process data. * Information Technology Infrastructure - hardware used to operate the system. * Internal Controls - security measures to protect sensitive data. Q2: The Accounting Information Cycle Record keeping or the data transformation process is called the accounting cycle‚ and there are nine steps to this: 1. Preparing transaction
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Case Study #1: Green Valley Medical AEM 4570: Advanced Corporate Finance Name: Di Hu Net ID: dh583 1. What are the key elements of Green Valley’s strategy? a. What kind of hospital is it‚ and how does that relate to their overall strategy? Green Valley Medical Center is a nonprofit teaching hospital comprising of 330 beds affiliated with a large state university in a midsize town located several hours from the state’s two urban centers. It was the only regional hospital
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1. What is diversifiable risk? It is a part that can be eliminated by diversification . 2.What is preferred stock? Stock with dividend priority over common stock‚ normally with a fixed dividend rate‚sometime without voting rights. 3.What is risk premium? The excess return required from an investment in a risky asset over that required from an risk-free investment. 4.What is principle of diversification? Spreading an investment across a number of asset will eliminate some‚ but not all‚of the
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for either investment alternative. The task for the students is to build a valuation model for the two capital investment alternatives‚ whereby they can evaluate the attractiveness of the investment based on net present value (NPV) and the internal rate of return (IRR) of the discounted cash flows (DCF). Further‚ the student will have the opportunity to interpret those results and to test those measures’ sensitivity to variability in the base case. This case was prepared with the following objectives
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SAP FOR ATLAM NOR FARAH BINTI NOR HASHIM SITI NURAIN BINTI ANUAR NURZAKIRAH NISRIN BINTI ZAINOL FATIN NADIA BINTI HAMZAH NUR SYUHAIDAH BINTI ZULKIPLI 2011334267 2011709173 2011599429 2011352115 2011362165 INTRODUCTION • Train and prepare the Malaysians for the Maritime Industry • Establishment of Akademi Teknikal Laut Malaysia (ATLAM) on 15 August 1981 • Privatized on Jan. 1‚ 1997 – PETRA Group Companies • Located at Melaka and Terengganu • By 2001‚ the academy had 195 staff (89 administraton
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assigned so that they make the best allocation of resources. Early research shows that methods such as payback model was more widely used which is basically just determining the length of time required for the firm to recover the outlay of cash and the return the project will generate. Other models just basically employed the concept of the time value of money. We have seen that more current models are attempting to include their analysis factors that might significantly affect the decision made by the
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maximum return for a given level of risk or a minimum risk for every level of return. Answer: TRUE Diff: 2 Section: 3.2 Approaches to Project Screening and Selection Skill: Factual AACSB Tag: Analytic Skills 6) The present value of money is lower the further out in the future I expect to spend it. Answer: FALSE Diff: 2 Section: 3.3 Financial Models Skill: Analytical AACSB Tag: Analytic Skills 7) The reciprocal of the payback period is used to calculate the average rate of return
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