If we look at the contribution rate for the years identified we can see that the contribution margin goes up the longer we don’t harvest the timber. NPV Attached is a table that Mr. Boles will need to analyze all four years to determine the NPV for all four periods to determine when would be the best time to harvest the land. | YEAR 20 | YEAR 25 | YEAR 30 | YEAR 35 | REVENUES | 61‚115‚963 | 96‚227‚011 | 139‚073‚614 | 180‚517‚988
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000 each year Tax rate = 25% Discount rate = 11% Compute and analyze items (a) through (d) using a Microsoft® Excel® spreadsheet. Make sure all calculations can be seen in the background of the applicable spreadsheet cells. In other words‚ leave an audit trail so others can see how you arrived at your calculations and analysis. Items (a) through (d) should be submitted in Microsoft® Excel®; indicate your recommendation (e) in the Microsoft® Excel® spreadsheet; the paper stated
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Q1. Peirson: Chapter 5: Questions 2‚ 3‚ 4‚ 5‚ 6‚ 10 and 11. Chapter 5 2. What factors does the required rate of return of a project reflect? Soln: The required rate of a return for a project reflects the rate of return that could be generated by investing in the next best alternative investment. This discount rate reflects the return required by the firm as compensation for having funds tied up in the project. The compensation demanded increases as the uncertainty‚ or risk‚ associated
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what will be the firm’s cost of equity using the CAPM approach? For this you would use the formula of Expected Rate of Return = r = rf + B (rm - rf) where Rf is the Risk free rate and B is the Beta amd Rm is the expected market return. So the calculations would look like 9% + (13% - 9%)1.6 = 9% + (4%)1.6 = 9% + 6.4% = 15.4%. c. If the firm’s bonds earn a rate of return of 12%‚ what will rs be using the bond-yield-plus-risk-premium approach? Use the midpoint of the risk premium range. For this
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of mutually exclusive investments. 5) Synthetic Resin NPV: NPV = CI – CO NPV = [(350‚000)/(1 + 0.1)^1 + (400‚000)/(1+0.1)^2 + (500‚000)/(1 + 0.1)^3 + (650‚000)/(1 + 0.1)^4 + (700‚000)/(1 + 0.1)^5] – 1‚000‚000 NPV = 1‚903‚024 – 1‚000‚000 NPV = 903‚024 Epoxy Resin NPV: NPV = [(600‚000)/(1 + 0.1)^1 + (400‚000)/(1+0.1)^2 + (300‚000)/(1 + 0.1)^3 + (200‚000)/(1 + 0.1)^4 + (200‚000)/(1 + 0.1)^5] – 1‚000‚000 NPV = 1‚362‚212 – 800‚000 NPV = 562‚212 The
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COMPUTING NPV and IRR PCP Pj vs STATUS QUO STRYKER Case decrease in purchases from contract manufacturers less incremental Stryker manufacturing costs Operating income from project less architect and engineering fees pre-tax income less taxes at 36% After-tax income add back Building depreciation add back Equipment depreciation add back It & other equipment depreciation Subtotal plus NCW Savings Subtotal Cash Flow Terminal Value‚ at book value Hurdle rate Discount factor at 15% PV of Cash Flows Sum
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Business Finance- Final Assessment | Naturally Fresh Plc | A report to the directors of Naturally Fresh Plc evaluating the financial position of a new project. The proposal concerns converting a number of farms in southern Europe into camp sites with effect from the 2012 holiday season. | | | Section 1: The required rate of return on equity of naturally Fresh Plc at 31st December 2012 The rate of return on equity represents the percentage return a company needs to achieve to be worth
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TEST 2 MGF 301 Corporation Finance Fall 2013 Please sign name in box (Note: Total Points = 100; Multiple Choice = 4 points each unless otherwise indicated) 1. YT Inc. is considering implementing a new project. Which of the following is a cash flow that should be taken into account for capital budgeting purposes? (a) Expected lost sales in a related YT Inc. product caused by the new product (b) The annual bonus paid to the YT Inc. President based on last year’s earnings
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into an equity joint venture in the city of Changchun.This proposal would be one of the first two green field equity joint venture with PepsiCo having control over both the board and day-today managmenet. PepsiCo uses capital budgeting tools such as NPV and IRR to systematically evaluate their investment project. Using this evaluation method Mr Hawaux‚ vice president of Finance for PepsiCo East Asia‚ was wondering whether this project would be profitable and if PepsiCo should proceed with the Changchun
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Going beyond the financial rewards‚ the strategic impact of the project is not only to increase our penetration rate and customer service quality in the short run‚ but also to enhance long-term growth potential. To arrive at the net present value calculation‚ we assume the project will increase B&K’s penetration rate from 50% to 70% in five years. With our current ordering logistics and sales force‚ we were unable to reach and serve customers in distant areas‚ and consequently growth has stayed
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