Capital Budget Recommendation Guillermo Furniture Overview Guillermo Navalez is an owner of a small furniture manufacturing company near his home‚ Sonora‚ Mexico. Sonora offers mild weather‚ beautiful scenery‚ and inexpensive housing. Guillermo is the largest manufacturer of furniture in his area where the supply of timber for tables and chairs is easily accessible due to the nature of resources (University of Phoenix‚ 2010). Labor is also inexpensive and Guillermo was making profit up until
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Chapter 9 Cost of Capital 1. What is the WACC? a. Weighted Average Cost of Capital- most firms employ different types of capital‚ and because of their differences in risk‚ the difference securities have different required rates of return. Typically=debt‚ preferred stock and common equity. 2. What precautions must we take when measuring the WACC to use for capital budgeting decisions (future investment)? b. The company’s current and recent past book and market value structures
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regularly overstated. Est. Time: 01 - 05 2. 3. a. Analysis of how project profitability and NPV change if different assumptions are made about sales‚ cost‚ and other key variables b. Project NPV is recalculated by changing several inputs to new‚ but consistent‚ values. c. Determines the level of future sales at which project profitability or NPV equals zero. d. An extension of sensitivity analysis that explores all possible outcomes and weights
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A. PALAN CONTENTS Introduction…………………………………………………………………….………2 Define Capital Investment Appraisal…………………………….………………….…2 Discounted cash flow methods……….………………………….………………….…4 Explanation of NPV…………………… ...................................................................…4 Explanation of IRR…………….……………………….…….……..…………………5 Advantages and disadvantages...……..……………………………………….……….5 Project calculations..................................
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For conventional cash flow‚ NPV takes the present value of all cash inflows over years 1 through n and subtracts from that the initial investment at time zero. The formula for the net present value of a project with conventional cash flows is: NPV = present value of cash inflows - initial investment 9-5 Acceptance criterion for the net present value method is if NPV > 0‚ accept; if NPV < 0‚ reject. If the firm undertakes projects with a positive NPV‚ the market value of the firm should
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2. The modified IRR (MIRR) method has wide appeal to professors‚ but most business executives prefer the NPV method to 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
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1 NPV—Mutually exclusive projects Hook Industries is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. a. Calculate the net present value (NPV) of each press. b. Using NPV‚ evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV. PERSONAL FINANCE PROBLEM P9–11 Long-term
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2.Changes in age and frequency of screening 3.Barriers to screening B.Underlying Factors 1.Socio-cultural factors 2.Socioeconomic factors Conclusion References Cerviacal Cancer 2013 Merck Sharp & Dohme Corp.‚ a subsudiary of Merck & Co.‚ Inc. retrieved from http://www.gardasil.com/hpv-and-your-child/certain-hpv-related-cancers/?MTD=2CPN=2&ENG=1&ADG=49&utm_source=google&utm_medium=cpc&utm_term=cervix%20cancer&utm_campaign=Awareness+7%2F13&utm_content=sPonLKiUk|dc_pcrid_30891608683
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Due Friday‚ November 15th at 1155 PM Kayla and Zhejia have always wanted to start their own consulting firm. Kayla and Zhejia have the opportunity to purchase an existing consulting firm for 500‚000. The purchase price of 500‚000 would be allocated 400‚000 for the existing businesss building and 100‚000 for the land on which the building sits. They plan to work for 15 years and then retire after selling their business to new owners. Start-up costs would include 40‚000 in working capital which
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performance measures (NPV‚ IRR‚ MIRR and Payback period) to decide whether to buy or build the technology. First of all‚ I use the given data to make the assumptions for both buy and build analysis. Next‚ I use the assumptions to calculate the after-tax cash flow. Last but not the least‚ I have the after-tax cash flow and I use excel to calculate the NPV‚ IRR‚ MIRR‚ and Payback period. From NPV perspective‚ both buying and building the technology are acceptable because these two projects NPV is positive.
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