Managing Capital and Financial Assets As Competition Bikes considers expansion into Canada‚ it must decide if the initial investment is worth the potential return. This report will recommend the capital structure that will maximize shareholder return‚ analyze the capital budget and areas of concern‚ recommend how to obtain and manage working capital for the expansion‚ and evaluate the options of merging with vs. acquiring Canadian Biking. A1. Capital Structure Capital structure refers to how
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Answer: D Diff: 2 Terms: discounted cash flow (DCF) methods Objective: 2 AACSB: Reflective thinking 5) Assume your goal in life is to retire with three million dollars. How much would you need to save at the end of each year if interest rates average 5% and you have a 25-year work life? A) $ 49‚110 B) $ 55‚596 C) $ 62‚858 D) $67‚508 Answer: C Explanation: C) Look up annuity factor in the table or use function on a calculator or computer. S (47.727) = $3‚000‚000 S = $62‚857
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Net Present Value (NPV) Internal Rate of Return (IRR) Return on Investment (ROI) Payback period 1) You can save money for your future. 2) Your money grows at a good rate when compared to the inflation rate. Investing is the process of making your money work for you‚ instead of simply sitting safely in the back‚ and it is increasingly a necessity of modern life. It is frequently no longer possible for an individual to work in one job all their life and retire on
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FORMULA Financial Environment: Quoted rate k = k* + IP + [DRP+LP+MRP] Risk & Return: Expected Return kˆ = P1k1 + P2k2………Pnkn Standard Deviation: The Coefficient of Variation (CV): CV = σ/kˆ The Expected Return on a Portfolio: kˆp = w1kˆ1+ w2kˆ2+……….+ wnkˆ n Portfolio Beta: bp = w1b1+w2b2 …….+wnbn Security market Line = SML = k = krf + (km-krf)b k = krf + (RPm)b Security Valuation: Current yield = annual interest payment market price of bonds
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decision Tree Analysis 17 Mean or Variance 18 Discount Rate 18 Biases 19 Monte Carlo Simulation – Workflow 19 Choices under Uncertainty 20 Spider/Tornado diagramm 21 Risk / Uncertainty 21 Strategic Management‚ Portfolio Management‚ Programm Management‚ Project Management 22 Bayes Rule: 22 Sensitivity Analysis: 22 Measure of Profitability and Performance 23 Net Profit 23 Payout 23 Return on Investment 23 Define sunk costs and give an example. Rate acceleration example. The difference between Monte
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offers compound interest of 8% annually. Calculation Present value (PV) =? Future value (FV) = (90‚000*15) = $1‚350‚000 Periodic payment amount (PMT) =? Interest rate per period (Rate) = 8% or 0.08 Number of payment periods (Nper) = 30 Using the Excel function “PV”‚ the following data is entered into the presented fields Rate = 8% Nper = 30 PMT =? Fv = 1‚350‚000 Type = blank PMT = $9‚416.15 $9‚416.15 is the amount required for 30 annual deposits with an 8% compound interest to yield
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It will be located at Raiwind Road‚ in Dubai town L.D.A near Suzuki motors. I choose this location because of cheap taxes and less expense. That area is in initial stages of development that’s why I choose that location as there are less employment rates. Complex will have a Big hall‚ Office‚ store room‚ Wash Rooms and Ground in it. I will be targeting the customers (age group of 10 to 50 years) and it can be useful for both males and females. I have not enough capital that we can advertise our product
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synergy: revenue enhancement‚ cost reduction‚ lower taxes‚ and lower cost of capital." (Ross‚ 2005) SAI will use these ideas to achieve growth expansion without a merger or acquisition. Next the paper will look at internal investment strategies. Internal Investment Strategies SAI ’s internal investment strategies were looked at to determine if the project undertakes will be greater than the financials asset of the comparable risk by looking at the risk of expanding market share of digital imaging versus
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1) How much importance should be given to the energy cost situation? Michael Burton’s proposal to expand into new energy efficient products is justified by increasing interest in the public and private sectors to reduce energy costs. At the highest level of government‚ the Obama administration has tied the US economy’s energy policy with its future success and competitiveness with other global powers. In a speech on June 2009‚ President Obama specifically mentions the Energy Department’s plans to
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Capital Budgeting 159 OVERVIEW Capital budgeting is finance terminology for the process of deciding whether or not to undertake an investment project. There are two standard concepts used in capital budgeting: net present value (NPV) and internal rate of return (IRR). Both of these concepts were introduced in Chapter 5; in this chapter we discuss their application to capital budgeting. Here are some of the topics covered: • Should you undertake a specific project? We call this the “yes–no” decision
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