and marginal tax rate. The $100 sales price generated a net present value (NPV) of approximately $128 million‚ an internal rate of return (IRR) of 607%‚ and a payback period of 3.24 quarters after the investment. Next‚ the $50 sales price generated an NPV of $71.8 million‚ an IRR of 342%‚ and a payback period of 4.01 quarters. Finally‚ the last option of providing the Monet technology for free is essentially useless. The NPV shows a loss of over $100 million; although the free
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CASE STUDY : 7-3 QUAlLITY METAL SERVCE CENTER Q1. Is the capital investment proposal described in Exhibit 3 an attractive one for Quality Metal Service Center? Yes‚ the purpose of a company is to maximum the profit‚ and as Elizabeth Barret suggested‚it can help company to make more profit. So the capital investment proposal described in Exhibit 3 is an attractive on for QMSC. Investment in machine $540‚000 10 years cash inflow $286‚000 PV of cash inflow $39‚182 Payback period = 4.5 years NPV=
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Chemicals need to take all these factors into consideration and eventually decide whether or not they should carry out this project. Methods of analysis include the evaluation of impact on Earnings per Share (EPS)‚ payback period‚ Discounted cash flow (NPV analysis)‚ and Internal Rate of Return (IRR). The report finds that the project will benefit Diamond Chemicals‚ and it is applicable. However‚ in order to make a desirable impact‚ Diamond Chemicals will have to: 1. Include the £2 million cost of tank
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Sunday‚ March 15‚ 2009 COST OF CAPITAL AT AES Evaluating the Historical Capital Budgeting Method Currently AES employs Project Finance Framework. Project finance tends to be used in projects with tangible assets with predictable cash flows in which construction and operating targets can be easily established through explicit contract. The key to AES projects financing lies with the precise forecasting of cash flows. In effect‚ the possibility of estimating cash flows with an acceptable
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INTRODUCTION Asahi Breweries‚ after its successful introduction of “Super Dry” to the Japanese beer market‚ has established itself as a profitable national player. To meet its growing demand‚ Asahi is considering an investment proposal to expand capacity. Firm-specific analysis‚ industry analysis‚ and a critical assessment of alternative strategies will be discussed to evaluate the proposal. A recommendation and implementation schedule will be presented based on the quantitative and qualitative
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earn significant cash flows while paying a royalty to the licensor. However‚ most important is the option that Merck has in deciding when to abandon or continue on this project (deferability or optionality). If Merck reaches a point when its expected NPV is negative‚ it can simply abandon the project. As a licensee‚ Merck can allow smaller biotechnology firms to focus on research and development. These smaller firms often have smaller budgets and are not financially or personnel equipped to handle the
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created. Also‚ if it is able to create a communication with dealers‚ it will effect to improve customer satisfaction and experience. Also‚ it helps to cut manufacturuing costs‚ which caused to compete effectively against competittor. Is the business case for the joint venture convincing? Back your answer up with a financial analysis Yes‚ it is. First‚ lets have a look at what was the situation for Fiat India before this JV. Some of their products failed to provide sufficient volumes
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ASSIGNMENT 1: Strategic Corporate Finance Type of Assessment: Case Study: 2500 words (equivalent) Submission deadline: Upload to Moodle before 14:00 noon Friday 22nd March 2013. Weighting: 50% of module mark Uploading to Moodle * Attach the feedback sheet and marking grid to the front of your assignment * Upload your spreadhseet Learning outcomes 1. Analyse different capital budgeting techniques 2. Evaluate the information derived from different capital budgeting techniques
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maintenance costs Variable selling expenses :15 percent of sales • The tax rate for the firm is 30 percent. a) Estimate the post-tax incremental cash flows for the project to manufacture Gale. b) What is the NPV of the project if the cost of capital is 18 percent? Malabar Corp. Malabar Corporation is determining the cash flow for a project involving replacement of an old machine by a new machine. The old machine bought a few years ago has a book value
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either the cash flows or the risks of projects X and Y. Which of the following statements is CORRECT? A. Safeco/Risco’s WACC‚ as a result of the merger‚ would be 10%. B. If evaluated using the correct post-merger WACC‚ Project X would have a negative NPV. C. After the merger‚ Safeco/Risco would have a corporate WACC of 11%. Therefore‚ it should reject Project X but accept Project Y. D. If the firm evaluates these projects and all other projects at the new overall corporate WACC‚ it will become riskier
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