their functions in view of the company practice in India? Justify your opinion? b. A firm purchases a machinery for Rs. 8‚00‚000 by making a down payment of Rs.1‚50‚000 and remainder in equal instalments of Rs. 1‚50‚000 for six years. What is the rate of interest to the firm? 2. a.Explain the mechanism of calculating the present value of cash flows..What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate b.”The increase in the risk-premium of all stocks
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(TV=FCF/(rwacc-g)). While the rwacc may be used for evaluating internal projects‚ the usage will be incorrect owing to the fact that the risk-return profile‚ debt structure and credit rating of individual projects/departments may be different. Sometimes companies may want to repurchase stock if they think their stock undervalued and to do this valuation cost of capital is required. But this would be a short term valuation and hence the risk free rate of return to be used should be of short term. The corporate
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/ 2 (to set display to two places‚ good for bond prices‚ e.g. $975.42) Orange Key / = / 4 (to set display to four places‚ good for ex-rates‚ e.g. $1.5074 / £) NOTE: Setting to two decimal places is not appropriate when calculating answers involving certain percentages or interest rates. For example‚ suppose your answer is an interest rate: .0851‚ or 8.51%. If your calculator is set to two decimal places‚ it will round your answer to .09 or 9%‚ which is almost .5% away from 8.51%.
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we look at the NPV‚ which is Net Present Value‚ is positive of about $784‚246‚998.21. Internal Rate of Return is 13.27%‚ which is far more than the cost of capital. This figure shows that the project turns to be very profitable. Some questions should still be paid attention to‚ like the difference between the forecasted average inflation rate and real world inflation rate‚ which engine has a lower returning rate‚ and the change and establishing of related policies. Think that he who laughs last laughs
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principle would be considered? Risk/return tradeoff Explanation: The risk/return tradeoff is a simple concept that focuses on creating the highest return for the least amount of risk. 5) What is another name for the acid test? Quick ratio Explanation: The acid test is designed to determine the liquidity. It is a ratio of “(cash + short-term securities + AR) / current liabilities)”. 6) What is used to determine the accounting rate of return on stockholders shares in a company
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$2‚500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1‚100‚000 cans per year $275‚000 Annual cost of direct labor for new employees: Wages 72‚000
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Why? When considering the proposed advertising program and technology upgrades‚ we have to ensure that the project will likely add value to the company‚ so we need to consider the return on investment versus the cost of capital. If the return on investment‚ measured by the net present value and internal rate of return‚ exceeds the cost of capital‚ the investment should be taken. In addition‚ we need to evaluate the project’s systematic risk (beta)‚ which includes risks that are not unique to a
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x (Debt/(Debt + Equity)) x (1 – Tax Rate) This method is applied for Marriott as a whole and its three divisions (lodging‚ contract services and restaurants). Marriott uses their WACC’s to discount appropriate cash flows by the appropriate and related divisional hurdle rate. This allows them to calculate the Net Present Value (NPV) of investment projects and evaluate their future and current investments. Also‚ Marriott has considered using their hurdle rates as a method of determining incentive
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BACHELOR OF INTERNATIONAL BUSINESS (HONS) YEAR 2 TRIMESTER 1 UKFF2083 FINANCIAL MANAGEMENT TUTORIAL (Question) Tutorial 1 Refer to Unit Plan‚ brief the students on learning objectives and learning outcomes of this unit. Refer to Unit Plan‚ remind students on coursework assessment (mid-term test 1 and 2). Mid-Term Test 1 will be given in WEEK 5 to monitor students’ progress on the understanding of the lectures and tutorials from Topic 1 to 3. Mid Tem test 2 will be given in WEEK 9
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Materials: This course requires quantitative analysis. It is therefore imperative that students acquire his or her own calculator. This calculator must be able to perform financial calculations such as time value of money‚ net present value‚ and internal rate of return. During tests and examinations‚ the sharing of calculators will be strictly prohibited. Suggested Supplemental Materials (if applicable): In this class we will use the Moodle (or other) Learning Management System. The site will contain
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