costs‚ NPV‚ IRR‚ and the Profitability Index SAI presented two capital investment proposals to their Financial Analyst to make a final decision. The first proposal involved expanding the existing Digital Imaging market share (Digi-image) and the second was to enter the Wireless Communication market (W-Comm). Many capital project investment decisions are made by comparing the economic value of the project ’s benefit to the economic value of its cost. The difference between the two is the NPV. The
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Capital Budgeting Case Learning Team A QRB/501 Quantitative Reasoning for Business July 29‚ 2014 Dr. Larry Olanrewaju Capital Budgeting Case Our Company has the opportunity to obtain another corporation. We have to choose between two companies‚ Company A or Company B. We only have $250‚000 to spend to purchase the companies. Because of this financial constraint‚ acquiring both corporations is not an option. Therefore‚ we must determine what company would be better to acquire. Company A Company
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( Design of a Small–Scale Biodiesel Production System Jeffrey Anderson‚ Jessica Caceres‚ Ali Khazaei‚ Jedidiah Shirey Abstract – The city of Fredericksburg is located in central Virginia and is home to 592 farms covering 16% of the total land area. Farms in this region have experienced declining profits from an average of $555 per farm in 1997 to -$14‚931 per farm in 2007. One of the ways to reduce operating costs and return to profitability is to significantly reduce diesel costs. An alternative
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five positive NPV projects to choose from. However‚ there is not enough manufacturing space in your plant to select all of the projects. Use profitability index to choose among the projects‚ given that you only have 100‚000 square feet of unused space. Project NPV Square feet needed Project 1 100‚000 40‚000 Project 2 88‚000 30‚000 Project 3 80‚000 38‚000 Project 4 50‚000 24‚000 Project 5 12‚000 1‚000 Total 330‚000 133‚000 Solution Compute the PI for each project Project NPV Square feet needed
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in depth. The project proposals (CPRs) are owned and presented by the real estate managers. There is a lot of pre-work that goes into the project before it’s presented. Typically 12-24 months of work is done to collect various data such as NPV‚ IRR‚ demographics‚ brand awareness‚ and sensitivity analysis. The sales projections are provided by the Research and Planning group and all project metrics are summarized into a standardized
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Present Value (NPV) of the four options. Substantiation Due to the nature of the industry and the machinery required‚ it is imperative that we enter into a long term contract with our clients. In valuing these contracts we must factor in the initial investment outlays for machine set-up costs (including the purchasing of new land)‚ as well as all future cash flows of a given project. To do this we use a form of analysis known as Net Present Value (NPV). In calculating the NPV of each investment
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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 Site
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Introduction Southern Company is one of the largest generators of electricity in American‚ serving the Southeastern United States for more than 100 years with clean‚ safe‚ reliable and affordable electricity. Its four subsidiaries: Georgia Power‚ Alabama Power‚ Mississippi Power and Florida Power‚ provide retail electric service to 4.4 million customers. This holding company’s operations cover all phases of the electric utility business capacity‚ as well as fiber optics and wireless communications
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measures. This project should be considered an independent project that is accepted or rejected on its own merits. The project will be decided from a cost/benefit standpoint by looking at the project ’s projected discounted cash flows‚ the calculated NPV of the project‚ the IRR and PI. Finally‚ the project ’s other qualitative advantages and disadvantages must also be considered before the project is accepted or rejected. Question 1: What is the basic nature of the problem in this case? Answer:
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Financial Appraisal techniques Part 2: Forecasting Part 1-Financial Appraisal Techniques Task 1. NET PRESENT VALUE (NPV) Year PROJECT X £000 Project Y £ 000 Discount Factor X Y 0 -200 -200 -200 -200 1 35 218 0.909 31.815 198.162 2 80 10 0.826 66.08 8.26 3 90 10 0.751 67.59 7.51 4 75 4 0.683 51.225 2.732 5 20 3 0.621 12.42 1.863 229 219 1)NET PRESENT VALUE (NPV) X= 229-200=29 Y=219-200=19 PAYBACK PERIOD: Cumulative Cash Flow Year PROJECT X £000 Project Y £ 000 X Y
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