on a 5 year projected income statement and cash flow statement as well as each Corporation’s NPV and IRR. The net present value represents the project adds to shareholder wealth. The net present value is also the present value of future cash returns. In order to find the net present value‚ the present value of cash flows and sum of discounted cash flows has to be determined. Finding the present value of cash flows includes the revenue minus the expenses‚ depreciation‚ and tax. The same
Premium Net present value Cash flow Internal rate of return
consults 12 June 2010 Table of Contents Introduction....................................................................................................1 Merits of accounting rate of return..............................................................................................1.1 Demerits of accounting rate of return.........................................................................................1.2 Merits of Payback Period.........................................................
Premium Net present value Financial ratios Internal rate of return
used by businesses. • Three common alternatives to the NPV rule: 1) Payback period 2) Internal rate of return (IRR) 3) Profitability index NBA6060‚ Spring 2014 Hyunseob Kim 4 2 Alternatives to NPV rule: Test • Which of the following rules may be useful when a firm is capital constrained? (that is‚ it cannot invest in all positive-NPV projects) a) Payback period b) Internal rate of return (IRR) c) Profitability index d) All of above NBA6060‚ Spring 2014 Hyunseob Kim
Premium Net present value Internal rate of return
|Case 9 | |Performance Boating Products‚ Inc. | Performance Boating Products‚ Inc I. Situation Analysis • Performance Boating Products‚ Inc (PBP) manufactures attachments for boat hulls and motors that aid watercraft in reducing drag and maintaining ‘plane’. • PBP attachments can be integrated as part of new
Premium Net present value Discounted cash flow Internal rate of return
Capital Budgeting Introduction Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm’s goal of maximizing owner wealth. A firm using capital budgeting‚ their goal is to see if there fixed income will cover itself for profit. Fixed incomes are things such as land‚ plant and equipment. When a firm using a machine to produce its good or service. They most of the time what the machine to produce the amount that they paid for the machine
Premium Net present value Cash flow Internal rate of return
find the cost of obtaining each source of financing today (not historical). Cost of Capital - The rate of return that a firm must earn on its investment projects to maintain its market value and attract funds. It depends on the risk of that investment (use of funds‚ not source of funds) 1. Cost of Debt (rd) – we use Bonds to represent the cost of long-term debt. Its required rate of return is the yield-to-maturity (YTM) of the bond. After we calculate the rd‚ we need to find the after-tax
Premium Finance Investment Rate of return
SampleFinal Finance 320 Finance Department Name___________________________________ Chapters: 1‚ 2‚ 3‚ 4‚ 5‚ 6‚ 7‚ 8‚ 9‚ 11‚ 12‚ and 13 1) A C corporation earns $4.50 per share before taxes. The corporate tax rate is 35%‚ the personal tax rate on dividends is 20%‚ and the personal tax rate on non-dividend income is 39%. What is the total amount of taxes paid if the company pays a $2.00 dividend? A) $2.48 B) $1.98 C) $0.90 D) $1.58 2) Why in general do financial managers make financial decisions
Premium Net present value Asset Cash flow
which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes‚ a prospective project’s lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark. Also known as "investment appraisal." Generating investment project proposals consistent with the firm’s strategic objectives; Estimating after-tax incremental operating cash flows for the investment
Premium Net present value Internal rate of return Rate of return
the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table attached. Bullock Mining has a 12 percent required return on all if its gold mines. 1. Construct a spreadsheet to calculate the payback period‚ internal rate of return‚ modified internal rate of return‚ and net present value of the proposed mine. 2. Based on your analysis‚ should the company open the mine? 3. Bonus question: Most spreadsheets do not have a built-in
Premium Net present value Cash flow Internal rate of return
a 390 unit the Millegan Creek Apartments project. The investment Strategy JPI tried to achieve at least a 150 basis point spread between the initial yield and the current market capitalization rates. JPI was seeking development opportunities which provide a going-in cap rate (or cash on cash return) of at least 10% on the total project cost. They had developed approximately 2800 apartment units and 1‚640 apartments. This record was in line their investment strategy of targeting a “holding
Premium Cash flow Net present value Internal rate of return