iron ore shipments. They claim demand in iron ore shipments has historically shown a strong correlation with charter rates‚ and we believe this makes sense. Vessel size‚ distance of route‚ and demand for ore/coal are drivers of daily rates. Per the case‚ technological developments in ship construction play a role in capacity‚ as newer ships are bigger‚ faster‚ and more fuel efficient‚ increasing the overall shipping capacity of a fleet. Accordingly the long-term decline in daily hire rates makes sense
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WOULD YOU RECOMMEND A HIGHER OR A LOWER LEVERAGE RATIO? WHATHAPPENS TO THE MINIMUM DSCR AND IRR ON EQUITY AS THE PROJECT LEVERAGE INCREASESTO 70% OF THE PROJECT FUNDS? DECREASES BY 50%?Soln. We would recommend that the debt should compromise of the already decided 60% level of thetotal funds. This recommendation I based on the following findings and reasons: 1. At 60% leverage the firm earns an IRR of 26% which gives it measurable gains when compared to the cost of equity of 21%. Hence giving
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scenarios‚ for example‚ a scenario summarizing the elimination of a staff position‚ and another scenario summarizing the elimination of a staff position and some increased site preparation costs. You will also find an analysis offering a convincing case‚ in the event that management can fund two projects‚ for the funding of custom order tracking system under multiple conditions. Project feasibility based on discount rates of 8‚ 10‚ 12‚ 14‚ and 16 percent: Breakeven chart comparing the net present
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Case 1: Acclaim Entertainment Capital Budgeting: Multiple Projects with Unequal Lives Acclaim Entertainment‚ Inc. is a mass marketer of interactive entertainment software whose games can be played on such well known video game systems as Nintendo and Sega. Some of their more successful games include Mortal Kombat I and II‚ NBA Jam I and II‚ Maximum Carnage‚ Virtual Bart (Simpson)‚ and NFL Quarterback. Acclaim has also obtained licenses from True Lies‚ Batman Forever‚ and Spiderman. The interactive
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1.) Currently Teletech Corporation uses 9.30% as their hurdle rate and satisfied with the intellectual relevance of a hurdle rate as an expression of the opportunity cost of money by the managers. As a result the firm’s share prices are inactive. Their price-to-earnings ratio is also below investor’s expectation in comparison to the company’s risk. The relationship between risk and return is important to take into consideration. The constant hurdle rate results in a flat line and doesn’t correlate
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TULANE UNIVERSITY Case Analysis: The Boeing 7E7 Valuation Section 02 Group 2 DIFEI SUN HONG CHEN JIAKAI DU XIAOTONG ZHANG YIHAN SUN 9/7/2014 1. Introductory to Case: The Boeing 7E7 In 2003‚ Boeing made a gamble announcing plans to build a new commercial jet called 7E7. The advantages in technology and precedency in travelling speed would prefigure the success of the business plan. However‚ with all
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simultaneously (Harris & Raviv‚ 1996). In this scenario‚ organization can select both the projects depending on the financial performance‚ and investment criteria. For decision that is more effective organization can use capital budgeting tool like NPV‚ IRR‚ PBP‚ to analyze their value before deciding to accept or reject the projects. Tools of Capital budgeting Investing decision is very risky and profitable and because of that organization are observed to conducting proper analyzing before reaching
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account payable minus from it the total amount would be $44000 that is called initial working capital that comes to year 0 cash flow tables as a negative amount because this is cash outflow. Although according to the case would be recovered at the end of the period which is 5 years in this case as cash inflow. Tax is not involved with working capital because it is a change in form of assets. (Gitman‚ Juchau- Flanagan‚ 2008‚ p. 357-358). 2-3. Change in net working capital 10% of each year new machine
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When the cost of capital is highly estimated‚ the NPV of projects will be smaller‚ which means that the company may reject projects with positive NPV or even extremely profitable project. And only a few projects would generate an IRR greater than the cost of capital‚ which also means the company might miss profitable projects. Conversely‚ when the cost of capital is underestimated‚ more projects will have positive or large NPV and generate an IRR greater than the cost of capital‚ the company might
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Integrated Case Week 5 Allied Components Company a. What is capital budgeting? Are there any similarities between a firm’s capital budgeting decisions and an individual’s investment decisions? Since capital budgeting decisions are critical for a company it typically would include fixed assets‚ construction of a building and or factory. It comes with a lot of risk management and analysis which is what an individual would do when trying to figure out if an investment is right for them or not. There
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