run the project or not. Six issues will be discussed as follows 1) importance of energy cost; 2) project’s cash flows; 3) cost of capital; 4) choose an engine 5) evaluation 6) accept or reject. We should accept the project because of the positive NPV and high IRR. We will gain $532 million in wealth which is a big money on the scale like this. The company has a bond rating of AA that makes the risk relatively low. So we should definitely say yes. Issues Importance of Energy Cost Road King Trucks
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is the NPV of the plant to manufacture? B. What is the NPV of the project at 10% higher than forecast‚ and what if the NPV was 10% lower? C. What is the NPV with all of the above‚ and how does the NPV change if the cost grows by 5% rather than 2%? The Bauer industries’‚ NPV from research was found to be 57.271771 for revenues and expenses. At 10% higher the companies NPV for revenue and expenses would be 93.99816. At 10% lower the NPV would be 20.54526. With the growth at 2% the NPV would
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Hertz should be willing to pay for the fleet of cars with all-equity funding is the price that makes the NPV of the transaction equal to zero. NPV = -Purchase Price + PV[(1- TC )(Earnings Before Taxes and Depreciation)] + PV(Depreciation Tax Shield) Let P equal the purchase price of the fleet. NPV = -P + (1-0.34)($100‚000)A50.10 + (0.34)(P/5)A50.10 Set the NPV equal to zero. 0 = -P + (1-0.34)($100‚000)A50.10 + (0.34)(P/5)A50.10 P = $250‚191.93 + (P)(0.34/5)A50
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flow -1‚500‚000 540‚000 Table 2 NPV= -$1‚500‚000+ $540‚000*[(1-1.13^-5)/0.13] = $399‚304.88 1. For optimistic sensitivity analysis Based on the information given as the table 1‚ we can see clearly that there are five variables in the analysis‚ in terms of market size‚ market share‚ price‚ variable costs‚ and fixed costs. For each variable changing‚ we can get different cash flows‚ which will result in the movement of NPV even making the negative NPV. The consequences of the altering are
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A Comparison of Capital Budgeting Techniques Capital budgeting deals with setting the criteria and prescribing the process required for making capital investment choices. Choosing an investment project‚ that is‚ making a capital investment choice is ultimately a cost/benefit analysis. It requires valuing the project by comparing the payoff to its costs. Problem Value‚ rank and select investment projects Example 1. Project A Required rate year 1: year 2 year 3 year 4 year 5 Initial
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[pic] MASTER of BUSINESS ADMINISTRATION ECONOMICS FOR MANAGERS MTKM 5033 CAPITAL BUDGETING BY; MOHD FIRDAUS IBRAHIM M061310005 NORZAHFRAN NORJAMAL M061310034 ABU HANIFAH BIN A. JALAL M061310004 INSTRUCTOR; DR. SENTOT IMAM WAHJONO Table of content Page___ CAPITAL BUDGETING DEFINED 3 Categories of investment THE CAPITAL BUDGETING PROCESS 4 CAPITAL BUDGETING DECISION RULES 5 New project decision rules of capital
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l. In a 1‚050-1‚500-word memo‚ define‚ analyze‚ and interpret the answers to items (c) through (h). Present the rationale behind each item and why it supports your decision stated in item (i). Also‚ attempt to describe the relationship between NPV and IRR. (Hint: The key factor here is the discount rate used.) In this memo‚ explain how you would analyze projects differently if they
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invest 8 8 PI 0.902 4 Calc annual OCF 8 8 IRR 14.12% 4 Calc terminal year 8 8 MIRR 16.10% 4 Net Project CF 8 8 NPV ($2‚295‚332.62) 4 Cum CF 2 2 Results area 20 20 Question 1 6 6 Questions Question 2 6 6 1) Using your spreadsheet model‚ indicate how much change in NPV occurs with a +1% increase in the discount rate. Question 3 4 4 Question 4 2 2 Question 5 12 12 NPV (at 19%) -2295333 —> note: type number here‚
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References: Berkow‚ R. (1997). The merck manual of medical information. Eating disorders‚ (pp. 451- 454). New York‚ NY: Merck & Co. Jarvis‚ C. (2004). Physical examination & health assessment (4th Ed.). St. Louis‚ MO: Saunders. UCLA health and medicine news (April‚ 04‚ 2006): UCLA researchers seek relatives with anorexia nervosa
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Fonderia di Torino S.p.A. 1. Please assess the economic benefits of acquiring the Vulcan Mold-Maker machine. What is the initial outlay? What are the benefits over time? What is an appropriate discount rate? Does the net present value(NPV) warrant the investment in the machine? Initial Case Outlay Price of new machine (1‚010‚000) Current after-tax market value of old machine [130‚000+{(415‚807-130‚682) -130‚000}*0.43]= 196‚704 Net outlay for new machine -1‚010‚000+196‚704 = -813‚296 Appropriate
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