La Familia Company Limited La Familia Company limited is considering the purchase a high speed drill to replace the old one that they currently have. The old drill was purchase 3 years ago at an installed cost of $500‚000 and is estimated to have a usable life of 5 years. The new drill is expected to cost $850‚000 with $20‚000 to be spent on installation and also has a 5 year usable life. La Familia can sell the old drill at $60‚000 inclusive of removal cost. The purchase of
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Yet Another Scandal The Allied Irish Bank Case Written by Hans Raj Nahata and Felix Stauber under supervision of Professor Michael Pinedo‚ Stern School of Business‚ New York University. For classroom use only. Introduction This is a short story of failures. It is rather a chilling story of how a single person‚ under the most common work circumstances‚ can lose $750 millions! And he does so‚ by bullying his subordinates‚ intimidating his colleagues‚ threatening his
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Hire Purchase Instalment Interest rate Useful Life Analysis ‐ Option 1 ‐ Ownership and Operation Rupees in Lakhs Sr. No 1 2 3 4 5 6 7 8 Particulars Intial Cost Benefits Received Depreciation (WDV @ 25%) Tax Sheild On Depreciation (3 x .35) Net Salvage value Post Tax Cash Flow (1+2+4+5) Discount Factor @ 12% Present Value (6/7) TOTAL NPV 0 ‐75.000 1 18.000 18.750 6.563 ‐75.000 1.000 ‐75.000 24.563 0.893 27.510 2 18.000 14.063 4.922 22.922 0.797 28.753 3 18.000 10.547 3.691 21.691 0.712 30.475 Year 4 18.000 7.910 2.769
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Writing Assignment Week 1 Question 2.2 – Accounting and Cash Flows: Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period? Financial Statements are prepared according to accrual rule of ‚ according to which cost and revenue are recorded as they occur and not when they are actually received or paid. This is why cash flows during the year may be different from revenue and costs
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world’s largest resource groups dealing in mineral exploration and production. The company has marked a distinction due to its deep inventory o f growth projects‚ quality of assets‚ focused-marketing and diversified markets across the countries. The operating assets have been grouped into customer sector including diamonds‚ petroleum‚ aluminium‚ iron ore‚ base metal and energy coal. Understanding all the argot of the financial market that migrates in it is a tough challenge. A reckoner and the financial
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7 – Discounted Cash Flow Techniques page 247 A brief tutorial on Excel financial functions (problems to follow) You may find the following Excel‚ built-in financial functions helpful when analyzing the problems below. (To access these functions‚ select Insert‚ Functions‚ and choose Financial.) =PV(rate‚ nper‚ pmt‚ fv‚ type) returns the present value of a series of cash flows. =FV(rate‚ nper‚ pmt‚ pv‚ type) returns the future value of a series of cash flows. =PMT(rate
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paying cash‚ manufacturing the product‚ selling the product and collecting cash. During the payment‚ the cash need occurs. Cash need should be covered by going into a debt. Cash budget is a primary tool in short-term financial planning. It is prepared after the operating budgets (sales‚ manufacturing expenses or merchandise purchases‚ selling expenses‚ and general and administrative expenses) and the capital expenditures budget are prepared. The cash budget starts with the beginning cash balance
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What is a Negative Cash Flow? When a company spends more than it receives during a set period of time‚ typically a quarter‚ the company is said to have a negative cash flow. This is often viewed as an indicator of financial ill health by people who are assessing companies to determine whether or not to invest in the company. Many things can influence cash flow‚ however‚ and one that’s negative should not necessarily be seen as a black mark. Publicly traded companies send out documentation
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present value of the asset’s expected future cash flows. SECURITY VALUATION In general‚ the intrinsic value of an asset = the present value of the stream of expected cash flows discounted at an appropriate required rate of return. Can the intrinsic value of an asset differ from its market value? Ct = cash flow to be received at time t. k = the investor’s required rate of return. V = the intrinsic value of the asset. BOND VALUATION Discount the bond’s cash flows at the investor’s required rate of return
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