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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NPV is short for Net Present Value and it makes difference between the present value and cost of a project. In addition‚ NPV takes into account all cash flows through out the whole life of the projects‚ as well as the time value of money. And it compares like with like as all inflows and outflows are discounted to today¡¯s date. Also‚ the cost of capital is very unlikely to be changed over a period of time. To judge if the NPV is good‚ we should see the value of it‚ and the rule is the high the better
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The time value of money assumes that the present value of a dollar in the future is less than a dollar today (Edmonds‚ Chapter 24‚ 2007). To make sure that cash outflows and cash inflows are comparable the present value of the future cash flows are restated to “today’s dollars” (“Capital Budgeting Techniques”‚ n.d.). This in turn allows a company to determine if the investment will be beneficial considering the cost. The present value technique uses a discount rate and the present value of future
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CHAPTER 6 PRJECT ANALYSIS UNDER CERTAINTY ANSWERS TO REVIEW QUESTIONS QUESTIONS 6.1 Explain and define the terms: net present value‚ internal rate of return‚ modified internal rate of return‚ accounting rate of return‚ and payback period. 6.2 Explain the role of ‘certainty’ in project evaluation decisions. 6.3 Assume that Anvil Inc. has estimated the following annual data for the introduction of a new product‚ Ranch Hand: EOY 0 EOY 1 EOY 2 EOY
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to install a new machine. Management is considering buying and leasing in the form of financial statements‚ so costs affect net profit of the company. In deciding whether to lease or purchase of the machine it is necessary to learn what each option‚ and the cash flows of the parameters to select will give the highest return of investment-related cash flow. Net present value (NPV) is used to decide whether to buy or lease of machines‚ and represents the cash flow associated with each option’s spreadsheet
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Q1. Why is Amazon’s cash cycle so much shorter than that of competitor Barnes & Noble? How does this comparison affect financial management decisions of other retailers? The market value of Amazon is much higher than Barnes & Noble. They are also in better marketing position then Barnes and Noble. Barnes & Noble has been on the rocks for a long time and failed to make headway in international markets with their Nook ereaders. The best answer I can give is because Amazon is a much larger company
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identifying which projects would be inadvisable to pursue based on company policies by first calculation the net present value‚ internal rate of return‚ accounting rate of return‚ and the payback period for each project. Capital Budgeting Figures (in € thousands) | | | Project A | Project B | Project C | Project D | Project E | Project F | Project G | Net Present Value | $5‚371.90 | $1‚044.90 | $5‚464.00 | $114.60 | $6‚480.00 | ($1‚727.00) | ($304.95) | Internal Rate of
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