be 13.487% and a Weighted Average Cost of Capital (WACC) to be at a value of 9.70%. Factoring in the WACC into our projections we found that if the demand maintains at an average rate the project will be at a positive Net Present Value of $5‚997‚505.31 with an IRR of 13.21%‚ a profitability index of 8.84‚ and an approximate payback period of 6.84 years. Please see Exhibits below for a snapshot of the capital budget and NPV values. This information seemed to be very promising for the project in
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Net Present Value‚ IRR‚ and the Payback Period Infomercial Entertainment‚ Inc. In the good of days—before cable TV‚ fax machines‚ and multimedia personal computers—the phrase‚"…and now a word from our sponsor…”usually meant just that‚ Television commercials were continued to thirty-and sixty—second messages‚ grouped together to occupy only two or three minutes of viewing time. Occasionally‚ if you stayed up late enough sitting in front of the tube‚ you’d see thirty minute segments on riveting topics
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The discount rate Main article: Discount rate The rate used to discount future cash flows to their present values is a key variable of this process. A firm’s weighted average cost of capital (after tax) is often used‚ but many people believe that it is appropriate to use higher discount rates to adjust for risk or other factors. A variable discount rate with higher rates applied to cash flows occurring further along the time span might be used to reflect the yield curve premium for long-term
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Horizontal and Vertical Analysis Horizontal Analysis Patton-Fuller Community Hospital Balance sheet December 31‚ 2009 and 2008 Assets 2009 2008 Percentage Total Current Assets 127‚867 130‚026 -1.7% Other Assets 459900 418480 9.88% Total Assets 587767 548535 7% Liabilities 2009 2008 Percentage Total Current Liabilities 23807 8380 184% Other Liabilities 438346 205069 114% Equity 125614 335085 -62.51% Total Liabilities and Equity 587767
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GROUP ASSIGNMENT CASE 23: DANFORTH & DONNALLEY LAUNDRY PRODUCTS COMPANY Purpose of Meeting: To make capital budgeting decision with respect to the introduction and production of a new product‚ a liquid detergent called Blast. Need to consider what types and which cash flows should be included in capital budgeting analysis. D&D was producing and marketing two major product lines: 1. Lift-Off: Low –suds‚ concentrated powder. 2. Wave: Traditional powder detergent. Questions &
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CAPACITY PLANNING Real Options Analysis Practice Questions and Solutions CAPACITY PLANNING Question 1: PROJECT SABLE Use a 30% per year discount rate to evaluate Project Sable‚ which has two phases. You may invest in the first‚ in both or in neither. You may not invest in the second phase without investing in the first. Phase 1 requires an investment of $100. One year later the project delivers on the average $120. At that time‚ after the phase 1 payout has been received‚ you may invest
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Chapter 6 | Capacity Planning | | TRUE/FALSE 1. Capacity is the maximum rate of output of a process. Answer: True Reference: Introduction Difficulty: Easy Keywords: capacity‚ maximum output rate 2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision‚ strategic decisions 3. Capacity can be expressed by output or input measures
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8. Year 0 Year 1 Year 2 Taxable income $9‚100 $10‚250 $15‚300 Marginal tax rate .30 .30 .30 Tax $2‚730 $3‚075 $4‚590 Revenue $13‚000 $16‚250 $23‚400 Expenses (4‚250) (8‚000) (8‚100) Tax cost (2‚730) (3‚075) (4‚590) Net cash flow $6‚020 $5‚175 $10‚710 Discount factor (6%) .943 .890 Present value $6‚020 $4‚880 $9‚532 NPV $20‚432 11. a. Year 0 Year 1 Year 2 Year 3 Year 4 Before-tax cash flow $(500‚000) $52‚500 $47‚500 $35‚500 $530‚500 Tax cost (7‚875)
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decision-making process. The net present value method is one of the useful methods that help financial managers to maximize shareholders’ wealth. The capital budgeting decision mergers Acquisitions Net Present Value Financial managers are working for the shareholders and their primary goal is profit maximization in order to maximize the wealth of the company and the shareholders. The Capital budgeting decision focuses on the net present value method‚ the payback
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Trident University Module 5- SLP FIN501 Dr. Glenn Tenney Net present Value‚ Mergers and acquisitions When brainstorming on the possible ideas of mergers or acquisitions it was easy at first to automatically think similar corporations within the same market either small or big or even in direct competition. Upon researching and reviewing the required readings I realized there are numerous types of mergers and acquisitions that could and should be considered in the terms of better business
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