payback period is: $48‚000 ÷ $8‚000 = 6 years The net present value is: | | Time Period | | CashFlows | × | 9% DiscountFactor | = | PresentValue | Present value of net annual cash flows | | 1–8 | | $8‚000 | | 5.53482 | | $44‚279 | Present value of salvage value | | 8 | | 20‚000 | | 0.50187 | | 10‚037 | | | | | | | | | 54‚316 | Capital investment | | | | | | | | 48‚000 | Net present value | | | | | | | | $6‚316 | Using financial calculator:
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project values using Net Present Value (NPV) • Conduct sensitivity analysis for the forecast inputs Setting • January 2001 • Customer offering attractive terms on 3-year lease for a capesize carrier • Would require purchase of new carrier since existing fleet does not fulfill customer needs • Should it be purchased? Industry Dynamics • Revenue Drivers • Outlook in the: – Short run – Next couple of years – Long run Project Evaluation • Net Present Value
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’s Furniture Store Proforma Analysis FIN 571 July 23‚ 2012 Abstract To sustain further improvements to a company’s bottom line and profitability‚ Guillermo’s Furniture is completing a pro-forma cash flow analysis that includes net present value (NPV)‚ internal rate return (IRR)‚ and weighted average cost control (WACC) analysis’. The plan is to incorporate a merger of a high tech furniture business‚ a broker distributer business‚ or the status quo manufacturing. The issues driving
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table wines and super premium table wines. In market research samplings at the company’s Napa Valley headquarters‚ it was judged superior to various competing products. Sarah Sharpe‚ the financial vice president‚ must analyze this project‚ and then present her findings to the company’s executive committee. Production facilities for the new wine would be set up in unused section of Robert Montoya’s main plant. New machinery with an estimated cost of $2‚200‚000 would be purchased‚ but shipping costs
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two capital budgeting cases corporations (A and B) have different revenues values and expenses as well as variable depreciation expenses‚ tax rates and discount rates. The members of our team had to compute both corporate cases NVP‚ IRR‚ PI‚ Payback Period‚ DPP‚ and project a 5-year income statement and cash flow in a Microsoft Excel spreadsheet. The future cash flows of the project and discounts them into present value amounts using a discount rate that represents the project’s cost of capital
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Chapter 2 Homework Problem 1: | Project Cost | Net Cash Flows | Payback | Project A | 250‚000.00 | 75‚000.00 | 3.33 | Project B | 150‚000.00 | 52‚000.00 | 2.88 | Project B is better. It is less risky because it has a payback period of 2.88 or 2 years and 10 months. Problem 2: Average Rate of Return: ? Annual Profits: 30‚000.00 Project Cost: 200‚000.00 Average Rate of Return = $30‚000/$200‚000 = 0.15 = 15% Problem 3: Year | Nominal Cash Flow | Discounted Cash Flow
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secure deals with companies like BMW‚ Ferrari‚ and Peugeot. Cerini needs to decide if the new machine‚ “The Vulcan Mold-Maker” is worth replacing his current machines. 1) To decide whether to purchase the machine or not‚ Cerini must compute the net present value of both products. In order to start‚ he needs to find the operating cash flows of each machine. The yearly operating cash flows are based on how much the machines will save‚ the costs they will incur each year‚ and the depreciation tax shield
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Part 1: Financial Appraisal techniques Part 2: Forecasting Part 1-Financial Appraisal Techniques Task 1. NET PRESENT VALUE (NPV) Year PROJECT X £000 Project Y £ 000 Discount Factor X Y 0 -200 -200 -200 -200 1 35 218 0.909 31.815 198.162 2 80 10 0.826 66.08 8.26 3 90 10 0.751 67.59 7.51 4 75 4 0.683 51.225 2.732 5 20 3 0.621 12.42 1.863 229 219 1)NET PRESENT VALUE (NPV) X= 229-200=29 Y=219-200=19 PAYBACK PERIOD: Cumulative Cash Flow Year PROJECT X £000 Project Y
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Q1. Please compare the advantages and disadvantages of the following investment rules: Net Present Value (NPV)‚ Payback Period‚ Discounted Payback Period‚ Average Accounting Return‚ Internal Rate of Return (IRR) and Profitability Index (PI). (You can start by considering the following questions for each investment rule: Does it use cash flows or accounting earnings? Does it consider all cash flows or not? Does it apply a proper discount rate? Whether the acceptance criteria are clear and reasonable
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share was £18‚800 with an average addition of £1‚100 per year2. The payback period for the project was 3.10 years‚ when considering the erosion of Rotterdam‚ this would increase to 3.46 years2. The net present value of Merseyside is £15.61 million and when considering erosion‚ the net present value is £11.37 million2. The internal rate of return is 33%‚ with the erosion‚ it is 28.2%2. Based on these four criteria‚ Merseyside is a valid project to consider. When considering the Rotterdam project
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