building site and building a new building on the property. The projected cost for the new building is $14 million‚ according to the vice president of marketing. The problem with the vice president’s proposal is that he does not take into account time value of money. The Executive Vice President has an argument for the vice president of marketing‚ stating that Guardian Insurance is willing to purchase the building site‚ construct the building‚ and install all fixtures to Wyndham Store’s specifications
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RCGC will be receiving 40 golf carts valued at $2‚240 each) and -$20‚000 in years one through five (payment of $500 for each of the 40 golf carts each year for five years). Table 2-1 listed below uses data based on a 40 golf cart purchase. With total net cash flows equal to -$10‚400. This means that RCGC is paying $10‚400 above the selling price in order to lease over a five-year period. There are several reasons why the
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of year 1 (any portion of year 1 net income would do). Then‚ its year 2 opening net assets are $276.36‚ and net income would be: P.V. Ltd. Income Statement For Year 2 Accretion of discount (10% × 276.36) P.V.’s balance sheet at time 2 would be: P.V. Ltd. Balance Sheet As at Time 2 $27.64 Financial Asset Cash: (140 + 14 + 150) $304.00 Shareholders’ Equity Opening Balance: 276.36 (286.36 - 10.00 dividend) Capital Asset‚ at Present value 0.00 $304.00 Net income 27.64 $304.00 Thus‚
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grade )(harvest per acre)(value of board game)](acres harvested) (1”C defect rate) Tractor cost = (Cost MBF)(MBF per acre)(acres) Road cost = (Cost MBF)(MBF per acre)(acres) Sale preparation and administration = (Cost MBF) (MBF acre) (acres) It is assumed that there is no depreciation as a result of the harvest. This is an indicator that operating cash flow is equal to net income. The NPV of the thinning‚ the NPV of all future harvests‚ minus the present value of the conservation fund costs
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traditional investment criteria that can be analyzed. Net present value of the discounted future cash flows and the internal rate of return are both important attributes that can measure the future success of a project. If Nucor were to invest in this new project‚ the net present value would be negative 34.02 million dollars. (Exhibit 1) This suggests that the investment should not be undertaken and would result in negative future economic value for the company. Conversely‚ the internal rate of return
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Answer: It is difficult to calculate. It relies on the time value of money. It can only be calculated when there are equal annual net cash flows. It ignores the expected profitability of a project. (TCO 1) Budgeting is a planning and control system. Discuss how budgeting contributes to these two functions of management. A budgeting process based on sound concepts of planning and control can help a company create value. Budgeting serves as a planning and controlling system by documenting
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Manitoba. The company has estimated net income of the three year from 1996 to 1998.The initial cash outlay at the start of 1996 is $ 5.2 million which include building‚ new high speed pizza space‚ additional warehouse space‚ and contingency need. As the Laurentian bakeries in the industry from the past 12 years since 1984‚ they take the advantage in capturing the profit in the industry. The present value of cash inflow is $8‚340‚451. So‚ the Net Present Value (NPV) of the project is $3‚140‚451 which
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that may affect Ben’s decision to get an MBA are: 1. There is no guarantee of getting the expected amount of salary income per annum after completion of the MBA degree program. 2. The MBA degree may (or may not) be of the exact same monetary value in future. 3. Possible changes in the employment situation within the economy. Question 3 Assuming all salaries are paid at the end of each year‚ what is the best option for Ben‚ from a strictly financial standpoint? Ben Bates has three
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| | | | | Present value of net annual cash flowsPresent value of salvage valueCapital investmentNet present value | | $34‚000 0 | XX | 5.53482 .50187 | == | ($188‚184)( 0)( 188‚184)( 200‚000)($ (11‚816) | The reduction in downtime would have to have a present value of at least $11‚816 in order for the project to be acceptable. BE12-5 Project A | | CashFlows | X | 9% DiscountFactor | = | PresentValue | | | | | | | | Present value of net annual cash flowsPresent
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In comparing two investment alternatives‚ the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach. True False 2. If two projects require the same amount of investment‚ then the preference ranking computed using either the project profitability index or the net present value will be the same. True False 3. In preference decisions‚ the
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