Capital Budgeting Rules: NPV‚ IRR‚ Payback‚ Discounted Payback‚ AAR Categories of Plans 1. Replacement Projects: decisions to replace old equipment – those are among the easier of capital budgeting techniques. It is important to decide whether to replace the equipment when it wears out or to invest in repairing the machine. 2. Expansion Projects: These are decisions whether to increase the size of business or not – they are more uncertain than replacement projects. 3. New products and services: These
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is easier to transfer ownership in a corporation through the sale of stock. The biggest disadvantage is the potential cost including more expansive record-keeping. Lecture 2 (chap 7+8) ACCOUNTING RATE OF RETURN Pros: * ARR provides an accounting measure of investment or project return Cons: * Doesn’t consider cash flows or market values * Ignores the timing of the earnings stream * Ignores risk differences between projects * An arbitrary measure‚ based on a ratio
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heating system‚ computer servers and had added a big-screen television in the lounge area. Spikes did face some competition in the rock-climbing wall division as there were 2 other competitors in the vicinity who offered similar services at comparable rates. Holistically speaking‚ the business was doing immensely well and faced little or no environmental threat apart from the fact that the premises was not owned by the business itself. It was leased from another person and was constantly at risk of zoning
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1991‚ revenue from the sale of lots each year‚ revenue from the sale of the recreation facility in 1999‚ construction costs each year‚ and taxes each year. 3. The project is a slam-dunk for the corporation because they are yielding an internal rate of return of 80%. The NPV of the future cash flows is significantly larger than the purchase costs of the assets. NPV Calculation | | Cash Flows | PV Table | | Yr 0 | (33‚000‚000) | 1 | (33‚000‚000) | Yr 1 | 22
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Resource: Financial management: Principles and applications Define the following terms and identify their roles in finance: Finance Efficient market Primary market Secondary market Risk Security Stock Bond Capital Debt Yield Rate of return Return on investment Cash flow 10 Week Two: Financial Planning Details Due Points Objectives 2.1 Describe the relationship between strategic planning and financial planning. 2.2 Prepare a cash budget. 2.3 Perform a break-even analysis
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a project. Capital inv appraisal of new technologies: Problems‚ misconceptions and research directions * Specifically‚ it has been alleged that the traditional appraisal methods of payback‚ discounted net present value (NPV) and internal rate of return (IRR) undervalues the long-term benefits; that traditional financial appraisals assume a far too static view of future industrial activity‚ under-rating the effects and pace of technological change; that there are many benefits from investments
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Tasty Foods Case Summary (Roxana): Tasty Foods Corporation was founded in 1995 by Henry Abercrombie. The corporation is a food conglomerate that has major product lines including cereals‚ frozen dinners‚ canned sodas and fruit juices. Abercrombie founded the company with a small inheritance and with the idea of producing instant hot cereal. The firm’s hot cereal proved to be a success and was well accepted by the consumers. Over the years it grew by its acquisitions and product innovation ideas
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either the regular or modified IRR. a. True b. False 3. A firm should never undertake an investment if accepting the project would cause an increase in the firm’s cost of capital. a. True b. False 4. A decrease in the firm’s discount rate (r) will increase NPV‚ which could change the accept/reject decision for a potential project. However‚ such a change would have no impact on the project’s IRR‚ hence on the accept/reject decision under the IRR method. a. True b. False 5. If
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{draw:frame} University of Derby/Buxton Hospitality Management MA Hotel Renovation A Tool For Repositioning In the Hotel Industry Submission Date: 7th May 2009 Business Analysis and Decision Making Student: Nana Yaa Addo Module Leader: Norman Dindsdale Introduction The hospitality industry has grown phenomenally since 2001 and has been driven by both leisure and business demand (kloppers 2005). The needs of the consumer have now become dynamic rather than static. Consumers
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Construction Management - II / Basics of Engineering Economics Performance:Slide501.doc Engineering Economics Principles § During our examinations we assume a consolidated economy. ( Free of extremities‚ such as war‚ hyperinflation‚ corruption‚ etc.‚ and fundamentally operated by pure market mechanisms and by stabil legal and regulations’ systems ) § Our examinations are aiming at economic comparisions of functionally equivalent technical and/or financial options. Figures resulted by any analysis
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