is equal to their opportunity cost of 12. Kayla and Zhejia believe a Simple Rate of Return on a project like this should be at least 30 because of the risk. They have made the following estimates Average consulting hours per week 30 per owner Average charge to customer 160.00 Average variable cost per hour 112.00 Annual property tax 11‚000.00 Annual other cash fixed costs 140‚000.00 Income tax rate 39 Building tax depreciation per year 20‚000 Cost of capital
Premium Net present value Internal rate of return
and Forbes 200 best small companies. Overall the respondents appear to have little interest in the current state of academic research in corporatefinance financial &cision methods‚ suggesting and in utiliringjinanceprofasors as paid or unpaid internal consultants. They do express a desire to know more about many that existing academic research can be better expractitioners and plained and operationalized. There is also some indication that neu academic research is desired in some areas. There
Premium Corporate finance Capital budgeting Investment
Lease-Versus-Buy Cost Analysis By Steven R. Price‚ CCIM Eventually‚ most users of commercial space ask themselves the question “Should I lease or purchase?” The answer lies in a thoughtful assessment of numerous subjective questions and a thorough‚ objective analysis of the cash flows aftertax of the lease-versus-own alternatives. In addition‚ the decision to lease or own is often driven by the cash needs of the business owner; the space needs of the business; whether the space is retail‚ office
Premium Net present value Cash flow Internal rate of return
cost of machinery 56‚500 = 2486.00 as the NPV d. Use a present value index to determine which investment alternative will yield the higher rate of return. PI= $15‚000*.620921/56‚500 = .16 This investment is not acceptable because it has a PI of less than 1.0 therefore the modernization project or the first alternative will have higher rate of return. Exercise 24-4A Determining the present value of an annuity The dean of the School of Social Science is trying to decide whether to purchase
Premium Net present value Variable cost Cash flow
on the red-coloured computer sheet. Question 1 Which of the following statements is FALSE? A) In general‚ the difference between the cost of capital and the internal rate of return (IRR) is the maximum amount of estimation error in the cost of capital estimate that can exist without altering the original decision. B) The internal rate of return (IRR) can provide information on how sensitive your analysis is to errors in the estimate of your cost of capital. C) If you are unsure of your cost of capital
Premium Net present value Stock market Dividend
Financial Analysis JET2 Task 3 A1. Capital Structure Recommendation A sound capital structure needs to be in place for Competition Bikes to maximize its shareholder return and expand. A good capital structure would ensure adequate funding and future business stability. However‚ adequate funding involves capital financing which also has its own risks. If bonds are issued‚ the company would have to pay interest on them but if sales projections aren’t met‚ this could have a huge negative impact
Premium Net present value Internal rate of return Investment
Value (PV) of the future cash inflows over the immediate cash outflow (Initial Investment - I). Simply put NPV=PV-I (http://accountingexplained.com). PV is calculated using the cost of capital (also called minimum required rate of return or hurdle rate) as the discount rate. Decision Rule: If NPV of project is positive‚ it is accepted‚ otherwise it is rejected (www.investopedia.com). “Since NPV represents the contribution to the wealth of the shareholders maximizing NPV is congruent with the objective
Premium Net present value Internal rate of return Time value of money
exchange rate projection and the discount rate. Q3. What differences might there be as to how the PRC partners do the analysis (or look at the future cash flows) versus PepsiCo? Case Summary（案例） In mid-June 1994‚ Andre Hawaux‚ vice-president finance for PepsiCo East Asia (PepsiCo)‚ was about to put together the information he had collected on the proposed Changchun bottling joint venture (JV) in order to analyze the financial profitability of the project using net present value (NPV) and internal rate
Premium Net present value Internal rate of return Cash flow
Project Free Cash Flows (dollars in thousands) Project number: 1 2 3 4 5 6 7 8 Initial investment (2‚000) (2‚000) (2‚000) (2‚000) (2‚000) (2‚000) (2‚000) (2‚000) Year 1 $ 330 $ 1‚666 $ 160 $ 280 $ 2‚200 $ 1‚200 $ (350) 2 330 334 200 280 900 (60) 3 330 165 350 280 300 60 4
Premium Net present value Internal rate of return
Scenario Analysis ------------------------------------------------- Year | ------------------------------------------------- Scenario 1 | ------------------------------------------------- Scenario 2 | ------------------------------------------------- Scenario 3 | ------------------------------------------------- | ------------------------------------------------- 15% Better | ------------------------------------------------- Stated Forecast | -------------------------------------------------
Premium Net present value Cash flow Costs