...Comparing Walmart and Target Capital Expenditures University Comparing Walmart and Target Capital Expenditures In every business there is always a need for capital expenditures. Capital Expenditures can be very beneficial and can also differentiate the numbers from rival companies. According to readings “capital expenses are extensive and mostly hold a company’s substantial amount of money. Companies invest in prime property, plant, machinery, buildings and other forms of fixed assets, which also act as securities for the company. I chose to look up the Capital Expenditures of two companies that are known in many households: Walmart and Target. The annual report of mutually businesses over the past three years will be examined. This paper will examine and compare the reports and the amount of capital spending over the past three years while defining how the amount of capital spending remains constant or if it’s altered. Capital expenditures can determine the major financial decisions that a company must make in order to acquire a sound investment. This paper will attempt to expand on the clarification of capital expenditure and the impact it can have on the organization’s debt capacities and capital structures. As stated by Byrd and associates in the text, there should be a comparison of the level of capital spending across the two firms. The paper will further point out how the spending was similar and/or different and speculate why the similarities or differences might...
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...Comparing Capital Expenditure for NBG and INVESCO Name: Course: Number: As defined by Hitchner, & Mard, (2003), capital expenditure is a cost that is incurred today for future benefits realization. Today’s capital expenditures create a difference in the company’s future status depending on the company’s strategies and resolutions. Capital expenditures are extensive and in most case, they will hold most of the company’s money. At one point in time, companies will invest in plant machinery, buildings, prime property, or any other form of fixed assets. Despite having the stage at which any company will have to incur capital expenditure, these capital expenses will vary depending on the industry the company is operating in, its operations, and the size of the company. Despite being closely related to the capital assets, capital expenses also relate to the maintenance cost of the already acquired assets (Hitchner, & Mard, 2003). The paper will analyze the capital expenditures of INVESCO and National Bank of Greece (NBG) companies by providing the differences and similarities of their capital expenditures. The analysis of the capital expenditure for the two companies will be between 2011 and 2013 financial years. The National Bank of Greece (NBG) The NBG is a global financial organization with well-established branches in various countries including the United States of America. NBG offers financial products and services to their clients ranging from those of individuals...
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...We did this to show a sensitivity analysis, but from our results we observed that values calculated from all the three methods were almost the same. We calculated the WACC using the return on assets derived by unlevering the equity beta of Celeron, which was comparable to the project at hand since Celeron was in the business of operating natural gas pipelines and processing facilities. To ensure a thorough discussion, we did a sensitivity analysis by calculating the WACC using a range of different capital structures namely Goodyear’s and Celeron’s current debt to market value of equity, debt to book value of equity, and 100% equity structure. However, our analysis showed that the capital structure did not have a significant impact on the WACCs and the values ranged between 17.35 to 17.67%. To determine the NPV of the project, we discounted the values of unlevered free cash flows from the project and terminal value of the pipeline project by the weighted average cost of capital. The resulting NPVs using the different values for the WACC and terminal values from our respective three methods were clearly...
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...have less leverage during the sale because there are only a limited number of purchasers and American must sell. I would be more willing to purchase the plant given that demand for sodium chlorate is expected to continue increasing. On the other hand, power costs which account for the majority of manufacturing costs were rising making it more expensive to produce. 2) Which firms are relevant for obtaining an asset beta for the Collinsville investment? Using the betas, determine the appropriate discount rate for the investment. Evaluate the investment. We are interested in obtaining the asset beta for the Collinsville investment. We can estimate asset betas by 1) looking it up in Bloomberg, 2) finding “identical twins” and comparing their betas, and 3) un-levering the beta from the company itself. Here, using 2 and 3...
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...February 29th 16 February 29th 16 PEM 6 – Evaluation of Projects – Case Study PEM 6 – Evaluation of Projects – Case Study Economic Assessment Rebecca Schauer & Simón Ucrós [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] Economic Assessment Rebecca Schauer & Simón Ucrós [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] 08 Fall 08 Fall INTRODUCTION After years of hard work by our geologists, geophysicists, and reservoir engineers, an oil field was discovered. Before deciding whether to develop this field or not, an economic assessment of our potential production options is necessary as to validate its economic viability. This report contains necessary work by surface installation specialists, tax experts, and others in order to define the best development option. Before getting into the specificities of the economic assessment, we will briefly summarize the technical data provided by the engineers, as well as the different development options, economic assumptions, fiscal terms, and project financing related to the project. After, we will explain the results of each scenario and conclude which one represents the best opportunity for our company. Technical Data * Water depth of offshore oil field in Africa: 330 feet (100 meters) * Reserves: * 1P: 120 Mb * 2P: 200 Mb ...
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...| | | | | | | | | | | | | | | | |American Chemical Corporation | | | | | | | | | | | | | | | | | ...
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...decision-maker must make a recommendation on a large expansion project. Discounted cash flow analysis is required. In addition to the assumptions and scenarios in the case, assume that, due to increased competition, the U.S grocery chain can only guarantee 33% of the increased sales unless they receive a $0.20 per pizza reduction in price. With this deduction, they will be able to guarantee 50% of the original increased sales. Should you reduce the price? Explain. In late May, 1995, Danielle Knowles, vice-president of operations for Laurentian Bakeries Inc., was preparing a capital expenditure proposal to expand the company’s frozen pizza plant in Winnipeg Manitoba. If the opportunity to expand into the U.S. frozen pizza market was taken, the company would need extra capacity. A detailed analysis, including a net present value calculation, was required by the company’s Capital Allocation Policy for all capital expenditures in order to ensure that projects were both profitable and consistent with corporate strategies. COMPANY BACKGROUHD Established in 1984, Laurentian Bakeries Inc. (Laurentian) manufactured a variety of frozen baked food products at plants in Winnipeg (pizzas), Toronto (cakes) and Montreal (pies). While each plant operated as a profit center, they shared a common sales force located at the company’ head office in Montreal. Although the Toronto plant was responsible for over 40% of corporate revenues in fiscal 1994, and the other plants was accounted for about 30%...
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...the reorganization? Hill-Rom’s segmentation strategy was based on the size of the health care facility, depending on attributes such as number of staffed beds and medical care specialties. For example, the more beds a hospital had and the more services it offered, the greater the likelihood that capital funding would be set aside on a regular basis to replace or acquire equipment. 3. What disconnect did the project team discover in sales resource allocation? The project team found Hill-Rom’s sales approach based on facility size alone to be problematic. While the size of the facility was indeed important, it was not useful for discerning patters of purchasing behavior or for understanding customer needs, which could be quite heterogeneous. Less obvious characteristics such as customer’s capital spending, profit margins, occupancy rate and facility’s mix of insurance payers also affected purchase behavior. 4. How did they segment their customers as a result of their study? Based on the characteristics in (3), Hill-Rom segmented its customers into eight segments and divided these segments in two groups: Key and Prime customers. Key customers had higher capital expenditures on medical products. They not only bought equipment more frequently, but also were more likely to seek in-depth, customized consultation. They looked for comprehensive solutions to their problems and saw purchases as investments. On the other hand,...
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...after a forecast of actions and the resourcing needed in the upcoming goals set by the company. Supply budgets are normally separated into 4 separate budgets Materials (operations) purchase budget which is based on estimates of expected operations, sales forecasts and plans. The advantages of this are it identifies cash flow designations, and isolates or separates issues or problems well in advance. MRO Budget, this covers a purchase plan that normally runs in a 12 month periods. These are normally set up for maintenance, repair, and operating supplies. Since there are so many line items on this set up it is difficult to budget each item. In capital expenditure they are planned over many for 1 year or our 3-4 years as well based on the strategic plan of the product lines and production needs. The companies projected capital purchases, obsolescence equipment, equipment replacements needs, expansion plans and new ventures are all important to the choices that best fit the company. Administrative or operating budget is a very important administrative budget in my opinion. Its function is to anticipate operate workloads, included as expenses incurred during supply operations. These expenses are what it takes to operate, lights, heat, wages, salaries, equipment cost, IT costs, office supplies, telephone...
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...Chapter 08 Business Income, Deductions, and Accounting Methods True / False Questions 1. The Internal Revenue Code authorizes deductions for trade or business activities if the expenditure is "ordinary and necessary". True False 2. Business activities are distinguished from other activities in that business activities are motivated by the pursuit of profits. True False 3. The phase "ordinary and necessary" has been defined to mean that an expense must be essential and indispensable to the conduct of a business. True False 4. Reasonable in amount means that expenditures can be exorbitant as long as the activity is motivated by profit. True False 5. The test for whether an expenditure is reasonable in amount is whether the expenditure was for an "arm's length" amount. True False 6. Illegal bribes and kickbacks are not deductible as business expenses, but this prohibition does not include fines incurred in the ordinary course of business. True False 7. Although expenses associated with illegal activities are not deductible, political contributions can be deducted as long as the donation is not made to a candidate for public office. True False 8. When a taxpayer borrows money and invests the loan proceeds in municipal bonds, the interest paid by the taxpayer on the debt will not be deductible. True False 9. Employees cannot deduct the cost of uniforms if the uniforms are also appropriate for normal...
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...challenges with management time, capital costs, and human resources. 1. Faster time to market: There was huge delay between the time when Bharti needed additional capacity and when that additional capacity could be up/running. Bharti was spending from six months to a year in the process of planning, tendering, purchasing, and installing. This took a lot of time from Bharti’s management team too and did not allow them to focus other important priorities in the company. 2. Scalability: Bharti was facing scalability issues both in its IT function and network function. 3. Human resources scarcity: Given the rapid growth in the industry, Bharti was finding it more and more difficult to hire and retain people. It was facing intense competition from other telecom providers as well are other multi-national companies to hire engineers. 4. Lean and predictable cost model: With the rapid changes in technology and also in the requirements for network capacity, Bharti was having a very unpredictable cost model. Instead of huge capital assets on the balance sheet and capital expenditures, Bharti wanted operating expenses which went hand-in-hand with the pace of its growth. 5. Capital Expenditures: With industry consolidation, the focus was switching from having a national footprint to having the ability to provide value-added service. Operators needed 2.5G and 3G technologies to provide those services, and the transition upward from 2G required major capital investment and Bharti did...
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...Research and Development (R&D) 1. Specific areas in which R&D was carried out: § Design, development and type tests on 12kV panels for withstanding 25kA, 1s internal arc fault, 12kV, 4000A, 40kA Panel & VCB and bushing for R.M.U. to withstand 20kA, 0.1s internal arc fault. § Design, development and type tests of cost effective 36kV OVCB and compact substation. § Development of 420kV, 63kA DBR & ES successfully. § DTC projects for 420kV/245kV/145kV for DBR, HCB & 420/245kV PG. § Cost effective circuit breakers of 400 kV & 400 kV 63 kA range were designed developed and tested. § New product development – Prototype development of 1.73 MW motor. § Frame size 500 developed for launch in this Financial Year 2010-11. § Motors for IE2 and IE3 efficiency class developed and is under testing in Germany, FS 71 to FS 355. § Launch of CACA design in medium voltage. § Design of switched mode power supplies for industrial and railway applications. § Design of battery chargers / earth leakage relay for railway applications. § Development of dry type multi-secondary transformer of 3500kVA for MV drives. § Development of Drive Control Cabinet for 10 Cubic meter Electric Mining Shovels. § Development of LV Drives Sinamics V50 55kW to 500kW. § Development of Traction / Electrical cabinets for 4500HP Diesel Locomotive Control. § Localization of MV Drives Perfect Harmony 500kVA to 3500kVA. § Localization of counting Head for...
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...declined post the 1st quarter in 2000, CFO Sullivan used the following accounting tactics to achieve targeted performance: 1. Accrual releases: Accounting principles require companies to estimate expected payments from line costs and match them with revenues in the income statement. Throughout 1999 and 2000, Sullivan told staff to release accruals which too high compared to the relative cash payments. Over a 7 quarter period between 1999 and 2000, Worldcom released $3.3 billion worth of accruals. 2. Expense capitalization: The above tactic could not be used by the end of 1st quarter of 2001 as few accruals were left to release. Sullivan devised a creative solution which started identifying costs of excess network capacity as capital expenditure rather than as an operating cost....
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...cellular, which require a substantial investment in infrastructure and long gestation periods, this multiple seems to be more appropriate than the price/earnings ratio. 3. In leveraged buyouts, where the key factor is cash generated by the firm prior to all discretionary expenditures, the EBITDA is the measure of cash flows from operations that can be used to support debt payment at least in the short term. 4. By looking at cashflows prior to capital expenditures, it may provide a better estimate of “optimal value”, especially if the capital expenditures are unwise or earn substandard returns. 5. By looking at the value of the firm and cashflows to the firm it allows for comparisons across firms with different financial leverage. Value/EBITDA Multiples: September 1997 Value/EBITDA Multiples: September 1997 600 500 400 300 200 100 0 Std. Dev = 14.65 Mean = 12 N = 3820.00 VEBITDA The Determinants of Value/EBITDA Multiples: Linkage to DCF Valuation l Firm value can be written as: FCFF1 V0 = WACC - g l The numerator can be written as follows: FCFF = EBIT (1-t) - (Cex - Depr) - ∆ Working Capital = (EBITDA - Depr) (1-t) - (Cex - Depr) - ∆ Working Capital = EBITDA (1-t) + Depr (t) - Cex - ∆ Working Capital From Firm Value to EBITDA Multiples l Now the Value of the firm can be rewritten as, Value...
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...| 2013 | | | Target case write-up | FNCE601 CASE WRITE-UP 02 | Capital Expenditure Committee (CEC) plays a critical role in determining the projects that best fit Target’s future store growth and capital-expenditure plans. However, if the projects larger than $50 million it’s the board of directors’ responsibility to approve the project. On the one hand, the process rigorously follows Target’s strategic goal. The committee not only considers a positive NPV but also the potential of the project, the scale of the project and the effect of the project for the future. In this regard, we believe the process is considerate and well-balanced. On the other hand, when deciding to open a new store, the CEC heavily rely on P04 as a prototype, which may have missed some information with regard to location, and geographic distribution. A real-estate manager is responsible for the proposal from the beginning to the end of setting up a new store. His or her insightful knowledge and capability play an important role in choosing, reviewing and presenting the projects before getting approved or rejected by the CEC. However, real-estate managers’ emotional involvement in the proposal may make them not as objective as possible with their projects. In this regard, we would suggest Target to hire more than one real-estate manager to balance their work. Conventionally, a high, positive NPV and a high IRR are important determinants to choose a project. In terms of 5 CPRs in Target...
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