First I would calculate the NPV and the IRR. If the NPV is higher then the return on the capital market‚ the project is profitable. The IRR shows me the discount rate that puts the NPV to zero. It could also be explained as the break-even point. Additionally the company could get a “Good As New” service contract for $500 a year. The machine would then produce cash flows of $4‚500 per year. I would again calculate the NPV with the new cash flow. If the NPV is higher then the return on the
Premium Net present value Cash flow Internal rate of return
production capacity at Hansson Private Label (HBL) and make a recommendation to Tucker Hansson. In this report‚ I will specifically focus on analyses of the project’s free cash flows (FCFs)‚ weighted average cost of capital (WACC) and net present value (NPV). With a sensitivity analysis‚ it can help us to observe how change in some key project variables would make the project stronger and weaker. This report can provide efficient information for Hansson to evaluate the potential value of this investment
Premium Net present value Weighted average cost of capital Investment
(1+r)n Rule 3: To move a CF back in time you must discount it PV= C/ (1+r)n Valuing Streams of CF NPV= ∑Cn/ (1+r)n Perpetuity Stream of equal CF that last forever PV= C/r Annuity A stream of CF that occur at regular intervals for N periods Growing Perpetuities Stream of CF that occur at regular intervals and grow at a constant rate forever (growing dividend) NPV= C/ r – g g= growth rate Growing Annuities PV= C x (1/(r-g)) (1-((1+g)/(1+r))N What if g>r
Premium Net present value Investment Finance
Case Study PAN EUROPA FOODS S.A C. Opitz and R.F. Bruner Table of Contents 1. Executive Summary 2. Problem Statement 3. Data Analysis 4. Alternative Analysis 5. Key Decisions Criteria 6. Recommendation 7. Action & Implementation Plan Executive Summary: The report summarizes Pan-Euorpa Food’s capital resource allocation budget for 1993 to present to stockholders. The board has presented 11 projects providing different needs and opportunities to grow the business. Exhibit
Premium Investment Capital accumulation Marketing
Capital Budgeting Case Su Guan Fin316 4:00 PM 11/13/2014 Directions: Answer questions 1 – 6 and turn in a hard copy of your answers at the beginning of class on Thursday November 13th. No late submissions will be accepted. You will need to use Excel or Google sheets for most of the analysis. Please type answers to the questions in this word document and attach each spreadsheet as exhibits at the back. I am trying to replicate an exam experience as much as possible so I will not be answering individual
Premium Costs Cost Variable cost
Assignment | Cost of Capital‚ Capital Budgeting and Financial Planning | Chapter(s) | 9‚ 10‚ 12 | Group Name | | Student Name(s) | | Date | | Instructions: HW Assignments will be uploaded to Kean Blackboard and must be accessed from there. You must work in groups where assigned (or independently if not assigned to groups) on homework assignments. Points are noted against each question. You are required to submit Home Work assignments electronically on Kean Blackboard using MS-Office
Premium Net present value Internal rate of return
Shapiro: Chapter 2: Capital-Budgeting Principles and Techniques QUESTIONS 1. a. What is the relationship between accounting income and economic profit? Answer: Accounting income is calculated by taking revenues and subtracting all cash and non-cash expenses (such as depreciation). Accounting income also often recognizes losses for tax purposes as well‚ even though the economic loss may have taken place at another time. Economic profit is the sum of the present values of all the cash flows
Premium Net present value Internal rate of return
per acre)(acres) Sale preparation and administration = (Cost MBF) (MBF acre) (acres) It is assumed that there is no depreciation as a result of the harvest. This is an indicator that operating cash flow is equal to net income. The NPV of the thinning‚ the NPV of all future harvests‚ minus the present value of the conservation fund costs. Revenue $39‚800‚250 Tractor cost 7‚200‚000 Road 2‚700‚000 Sale preparation & admin 945‚000 Excavator piling 1‚200‚000 Broadcast burning 2‚287‚500
Premium Net present value Free cash flow Cash flow
CHAPTER 14 OPTIONS AND CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. A call option confers the right‚ without the obligation‚ to buy an asset at a given price on or before a given date. A put option confers the right‚ without the obligation‚ to sell an asset at a given price on or before a given date. You would buy a call option if you expect the price of the asset to increase. You would buy a put option if you expect the price of the asset to decrease. A
Premium Option Call option Strike price
6% and the current competitive exchange rate is €0.78 to $1.00. What is the NPV of this project? Would you take the project? A) NPV = 0; No B) NPV = 2‚358; No C) NPV = 2‚358; Yes D) NPV = 13‚650; Yes Answer: C Explanation: A) B) C) NPV = -250‚000 + (€208‚650 / 1.06) × $1.00 / €0.78 = 2358‚ so since NPV > 0‚ accept D) Diff: 3 Topic: 3.3 Present Value and the NPV Decision Rule Skill: Analytical Use the table for the question(s) below
Premium Risk Net present value Financial markets