The crossover rate‚ where the NPVs are the same is 8.16%. Project A Project B Required Return 8.25% Required Return 8.25% Cash Flows Period Cash Flows Cash Flows Period Cash Flows Initial Outlay -8‚500 0 -8‚500 Initial Outlay -9‚500 0 -9‚500 1 3‚600 1 3‚900 2 2‚400 2 2‚900 3 2‚850 3 2‚900 4 5‚200 4 5‚550 Discounted Payback Period 3.23 Discounted Payback Period 3.28 NPV $2‚907.51 NPV $2‚905.64 Profitability Index
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NPV Versus IRR W.L. Silber I. Our favorite project A has the following cash flows: -1000 0 0 1 0 2 +300 3 +600 4 +900 5 We know that if the cost of capital is 18 percent we reject the project because the net present value is negative: - 1000 + 300 600 900 + + = NPV 3 4 (1.18) (1.18) (1.18)5 - 1000 + 182.59 + 309.47 + 393.40 = -114.54 We also know that at a cost of capital of 8% we accept the project because the net present value is positive: - 1000 + 300 600 900
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Running head: A COMPARISON OF EVA AND NPV A Comparison of EVA and NPV (discuss the differences and similarity of EVA and NPV; why would companies choose to adopt EVA‚ implementation issues; chronicle the implementation experience of EVA on a real life company). 1 A COMPARISON OF EVA AND NPV 2 A Comparison of EVA and NPV (discuss the differences and similarity of EVA and NPV; why would companies choose to adopt EVA‚ implementation issues; chronicle the implementation
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Superior Grain Elevator Superior Grain Elevator SUPERIOR GRAIN ELEVATOR‚ INC. EXECUTIVE SUMMARY Superior Grain Elevator was located at Thunder Bay‚ Ontario‚ Canada’s third busiest port. With 14 giant grain elevators‚ Superior was able to load ships constantly sending grain to all parts of Eastern Canada and the globe. The ships were contracted for by agents who lined up the required tonnage of shipping capacity to fulfill the various contracts held with Superior. Although the agents tried
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**What is NPV?** a) If the value of NPV is greater than 0‚ then the project is a go! In other words‚ it’s profitable and worth the risk. b) If the value of NPV is less than 0‚ then the project isn’t worth the risk and is a no-go. So NPV takes risk and reward into consideration‚ which is why we use it in the world of corporate finance and capital budgeting. **Example** In order for us to calculate NPV‚ let’s use the following example. Suppose we’d like to make 10% profit on a 3
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before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. 2. Assume that the after-tax required rate of return for Deer Valley is 8%‚ the income tax rate is 40%‚ and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the
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Tutorial 2: Topic 2: Discuss the Pros and Cons of the Payback and Accounting rate (ARR) of return. | Advantages | Disadvantage | Payback | * It is using as a supplementary methods of investment technique.Then it is more easily to understand and calculate rather than the other sophisticated methods. * Increasing the efficiency of appraisals process. It is useful in using at early stage to filter the project to avoid premature rejection. * Simple and easy to apply It is a simple and
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present value the net present value (NPV) or net present worth (NPW)[of a time series of cash flows‚ both incoming and outgoing‚ is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price‚ the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash
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Figure 1: Cash flow comparison for 15 and 25 year term (NY) 9 Figure 2: Cash flow comparison for 15 and 25 year term (HK) 9 Figure 3: Revenue and Operating Expenses (HK) 10 List of Tables Table 1: List of Assumptions made for NPV analysis 4 Table 2: List of Limitations on NPV Analysis. 4 Table 3: Estimation of Resale value of Carrier @15th year 7 1. Introduction 1.1 Executive Summary Ocean Carriers Inc. (OCI) is an International provider of Marine transportation services mainly focussing on
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Principles of Managerial Finance MBA6‚ GROUP 1 Phelps Toy Company TOYS Prepared by :Essam Gayad ‚ Aladdin Al-Jajeh‚ Majed Mourtada ‚ Shaza.Rifaai MHD Obada Morad Date 22nd May 2012 MBA6 -MF Phelps toy company case‚ 6 YEARS BUDGET STUDY‚ PROJECT FEASIBLITY Table (1) sales and net income of the company for the past years. year 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 $SALES 150‚000 240‚000 756‚000 1‚340‚000 2‚680‚000 3‚320‚000 5‚580‚000
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