Making a sound financial decision is a vital component of the success of a business. The business must conduct market research‚ description of products‚ services and marketing strategies‚ and setting principles for the business’s success. Expenses should be noted prior to writing a financial plan. The goal of a business is to operate on a predefined budget. Ensure there are no undefined or hidden cost that could cause problems later. The business plan helps the business to make day-to-day decisions
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most capital projects involve numerous variables and possible outcomes. For instance‚ estimating cash flows associated with a project involves working capital requirements‚ project risk‚ tax considerations‚ expected rates of inflation‚ and disposal values. It is necessary to understand existing markets to forecast project revenues‚ assess competitive impacts of the project‚ and determine the life cycle of the project. Investment Appraisal is therefore more than the identification and evaluation of
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meet company needs for making major decisions with data consisting of clear goals‚ a planned design‚ high ethics‚ revealed limitations‚ adequate analysis‚ and justified conclusions (Cooper and Schindler‚ 2003). In this paper‚ the methods of net present value and internal rate of return are examined based on real-world capital budgeting decisions. This paper also gives insight on valuation techniques used to determine internal and external investment decision strategies and the risk associated with
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be used as criterion for acceptance or rejection of a project in capital-budgeting analysis. The project’s initial outlay cost equals $8‚100‚000. The net present value is $15‚955‚500. The internal rate of return is 76.16%. After careful consideration of these values‚ it is in the best interest of the firm to accept this project. The net present value is positive or greater than zero and the internal rate of return is greater than the required rate of return 15%. This is to be considered a “good”
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Lockheed Tri Star Assignment Questions 1. Compute the payback‚ net present value (NPV)‚ and internal rate of return (IRR) for this machine. Should Rainbow purchase it? Assume that all cash flows (except the initial purchase) occur at the end of the year‚ and do not consider taxes. 2. For a $500 per year additional expenditure‚ Rainbow can get a "Good As New" service contract that essentially keeps the machine in new condition forever. Net of the cost of the service contract‚ the machine would then
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repurchase announcement conveys no new information to investors about the profitability or risk it will be a good idea as the investors do not expect Hole Foods Donuts to grow in future But with no tax and repurchase of share will increase the share value and investors will assuming that company is earning more profit and growing in speed. B. How many shares will Hole Foods Donuts repurchase? Total Number of Shares: - 200‚000 Share Price: - $ 2/ share Total
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Furniture the future inflows of cash must be compared with the interest rate that Guillermo could receive on the investment somewhere else. Internal Rate of Return is another part of capital budgeting. It is a discount rate used to make the net present value of cash flows for a project zero. The higher the internal rate of return the more desirable the project is ("Investopedia"‚ 2014). The greater the IRR is than the required rate of return on either opportunity‚ the more advantageous it is for
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BA 213 – Test 3 Review(Ch10‚13 and 14) Instructor: Usha Ramanujam 1. Which of the following statements is a good description of the variances that should be investigated under the management by exception concept? A) all variances should be investigated. B) only unfavorable variances should be investigated. C) a small random sample of all variances should be investigated. D) unusually large favorable and unfavorable variances should be investigated
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the following has the highest time value of money at the same time interest rate for the same number of payments Correct Answer: the future value or an annuity-due Which of the following would increase the present value of a single cash flow? Wrong Answer: a decrease in the cash flow You invest $1000 at 6% compounded annually and want to know how much money you will have in 5 years. What does the $1000 represent? Correct Answer: the present value What is the appropriate interest
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d. 10.5% 4. The cost of preferred stock is equal to: a. the preferred stock dividend divided by market price b. the preferred stock dividend divided by its par value c. (1 - tax rate) times the preferred stock dividend divided by net price d. preferred stock dividend divided by the net market price 5. The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax
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