...Case Write-Up: The Investment Detective Case Summary The purpose of this case is to become a capital budgeting analyst and evaluate which set of free cash flows for 8 projects will result in the most effective investment for a firm’s capital. The objective given is to rank the four best that the company should accept. The case is broken down into three separate steps including the given information about estimated cash flows (inflows & outflows), determining the appropriate discount rate, and evaluating the cash flows using the IRR (Internal Rate of Return), MIRR (Modified Internal Rate of Return), NPV (Net Present Value), and other metrics. Each project is chosen solely on the basis of the quantitative analysis. Here are some factors to consider for this case: Each project has the same initial investment of $2 million; in addition, all are believed to be of the same risk class. The managers have determined that projects 7 and 8 are mutually exclusive. The issue is that the WACC has never been officially estimated and in the past the discount rate has been assumed at 10 percent (however, certain officers have asserted the discount rate to be higher). Ranking Projects Ranking projects simply through the inspection of cash flows is inadequate due to the time value of money and cost of capital of companies; the only piece of information that can be derived from looking at the cash flows is the amount of time it would take to be paid back (regular payback period). There...
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...Synopsis and Objectives This case presents the cash flows of eight unidentified investments, all of equal initial investment size. The task is to rank the projects. The first objective of the case is to examine critically the principal capital-budgeting criteria. A second objective is to consider the problem that arises when net present value (NPV) and internal rate of return (IRR) disagree as to the ranking of two mutually exclusive projects. Finally, the case is a vehicle for introducing the problem created by attempting to rank projects of unequal life and the solution to that difficulty—the equivalent-annuity criterion. (Questions for this case are on page 257) THE INVESTMENT DETECTIVE Comparative Analysis of Investments 1. Project free cash flows (in thousands of dollars) Project number 1 2 3 4 5 6 7 8 Initial investment $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) $(2,000) Year 1 $ 330 $1,666 $160 280 $2,2001 $1,200 $(350) 2 330 3341 200 280 9001 (60) 3 330 $ 165 350 280 300 60 4 330 395 280 90 350 5 330 432 280 $ 70 700 6 330 4401 280 1,200 7 3301 442 280 $2,2501 8 $1,000 444 2801 9 446 280 10 448 280 11 450 280 12 451 280 13 451 280 14 452 280 15 $10,0001 $(2,000) $ 280 Synopsis and Objectives This case presents the cash flows of eight unidentified investments, all of equal initial investment size. The task is to rank the projects. The first objective of the case is to examine critically...
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...Bruner: Case Studies in Finance: Managing for Corporate Value Creation, 4/e IV. Capital Budgeting and Resource Allocation 17. The Investment Detective © The McGraw−Hill Companies, 2003 CASE 17 The Investment Detective The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm’s capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital-budgeting analyst is necessarily, therefore, a detective who must winnow good evidence from bad. Much of the challenge is knowing what quantitative analysis to generate in the first place. Suppose you are a new capital-budgeting analyst for a company considering investments in the eight projects listed in Exhibit 1. The chief financial officer of your company has asked you to rank the projects and recommend the “four best” that the company should accept. In this assignment, only the quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive. All the projects require the same initial investment, $2 million. Moreover, all are believed to be of the same risk class. The weighted-average cost of capital of the firm has never been estimated. In the past, analysts have simply assumed that 10 percent was an appropriate discount rate (although certain...
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...For the exclusive use of S. YAN UV0072 Version 2.2 THE INVESTMENT DETECTIVE The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm’s capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital-budgeting analyst, therefore, is necessarily a detective who must winnow bad evidence from good. Much of the challenge is in knowing what quantitative analysis to generate in the first place. Suppose you are a new capital-budgeting analyst for a company considering investments in the eight projects listed in Exhibit 1. The chief financial officer of your company has asked you to rank the projects and recommend the “four best” that the company should accept. In this assignment, only the quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive. All the projects require the same initial investment, $2 million. Moreover, all are believed to be of the same risk class. The firm’s weighted average cost of capital has never been estimated. In the past, analysts have simply assumed that 10% was an appropriate discount rate (although certain officers of the company have recently asserted that the discount rate should be much higher). To stimulate your analysis, consider the following questions: ...
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...The University of Lethbridge Calgary Campus Faculty of Management Management 4430Y Financial Management Spring 2011 A.P. Palasvirta Office: Markin 4132, Lethbridge Phone: (403) 332-4582 e-mail: oz.palasvirta@uleth.ca Goal of Course Management 4430 is the capstone course in finance and will incorporate concepts you have learned in through your study of corporate, investments, and international. We will utilize the case methodology to focus our analysis. Cases describe a context in which a particular problem is found. Regardless of the particular characteristics of the problem, problem solving follows a general methodology: identification of the problem, describing the context of the problem, analysis of potential alternative solutions, the identification of the best solution, implementation of the best solution , and the creation of controls and contingency plans, if applicable. Text and Other Sources: E-book based on Case Studies in Finance, 6th ed., 2010, McGraw Hill, Toronto, ISBN Prerequisites Management 3412, Fundamentals of Investments Investments, Analysis & Management, 2nd Canadian Ed., 2005, Cleary & Jones, John Wiley & Sons Canada Ltd., Mississauga ISBN 0-470-83542-7 Management 3460, Corporate Finance Fundamentals of Corporate Finance, 6th Canadian Ed., 2007, Ross, Westerfield, Jordan, & Roberts, McGraw-Hill Ryerson, Toronto ISBN 13: 978-0-07-095910-1 A list of topics for which you should have working knowledge...
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...MGT 4430 Fall 10 Investment Detective 08 Fall Investment Detective MGT 4430 With the realization that capital resources are limited, a prioritization of proposed projects must be established. Although most of these projects may satisfy the requirements to accept a project, due to capital budget constraints a company must choose which project they might best benefit from after analyzing the data associated with each project. After looking at Exhibits 1-6 with analysis of each project’s NPV, MIRR, Payback, and Profitability Index a list can be established below. Rank | Project Number | 1 | 7 | 2 | 4 | 3 | 3 | 4 | 5 | 5 | 1 | 6 | 6 | 7 | 2 | 8 | 8 | After looking at the data analysis in Exhibit 1, we are able to eliminate a few projects right away from the ranking of choices we would be interested in. After seeing that project 7 and 8 are mutually exclusive and 7 being a better project based on the quicker payback and initial returns. As well we can see that project 2 is in most regards, a terrible investment. We are able to see a negative NPV and an unacceptable MIRR which is lower than our desired discount rate. At a glance we are also able to see that project 6 is on the brink of acceptable which allows our investment team to accurately rank the three lowest projects on the list. One issue that must be regarded before being able to further progress through my reasons for rank is that the company has acknowledged the potential for the...
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...Marketing Function in FMCG Environment Brand Building The Role of Marketing in FMCG Environment The FMCG market is particularly competitive Category Leadership Greater Profitability Higher Investment Growth The Role of Marketing in FMCG Environment The KEY decision outputs recorded are: Market definition / segmentation Category/Brand vision Category drivers of value Business goals Brand/portfolio roles Where we will compete, where not and why Our future intention of what we will be Where our growth will come from Our business target, growth, share or margin Positioning, roles and strategy for the total brand portfolio (global and key regional / local brands) The main strategic actions / objectives / by channel or global strategic Customer How we will win, through specific actions and developing capability: innovation, communication, HR, resource priorities, etc. Metrics and milestones to track progress Must-stops and don’t starts How we will act as a team, our category culture What might destroy our plans Strategic actions Detailed strategies / capabilities Targets / measures What we will not do Team behaviour / culture Key risks Developing a Marketing Strategy for FMCG Case Study: How familiar are you with the Unilever 6P‟s Model? Market dynamics & financial returns Profit Turnover Price Volume Value market size Market growth Volume market size Volume share Value share Buying behaviour Loyalty Penetration Share of purchase Average pack...
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...Peninah Machaga The Investment Detective Financial Administration FINC 5713-180 DR Roy Patin Fall 2013 10/22/2013. The Investment detective. The case is basically discussing the importance of Capital Budgeting and resource allocation. Capital budgeting is the whole process of analyzing projects and deciding which ones to accept and thus include in the capital budget. It is important for a company to evaluate proposed projects accurately because there are delicate issues that can obscure the best investment issues. Analyzing project proposals require skills, effort and time therefore, analyst should be in a position to know what quantitative analysis he is to generate. Required To Rank the eight projects and recommend the four best that company should accept. Assumptions * All the projects require the same initial investment of $2million with an assumption that, they have same risk class. * Weighted average cost of capital has never been estimated. * Discount rate is 10% . However most companies use NPV and IRR The first step in project analysis is to estimate the cash flow. * It is possible to rank the project by simply inspecting the cash flow. For example by the use of excess cash flow over the initial investment, we can be able to rank the projects according to how much each project has generated within a specific period. The higher the excess value, the best rank it is given. By the use of the illustration below, we can rank the project as follows Excess...
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...1. This is considered to be a “detective” case. 2. As a “detective” case, please consider the following elements to solve: a. What is the mission of the nonprofit? b. What “clues” exist in the narrative that distinguish the nature and/or mission of the nonprofit? c. How do the “clues” in the narrative “match” the financial information provided in the financial section? 3. EXAMPLE: a. Mission of nonprofit organization: i. The Ford Foundation is a charitable organization that has a mission of granting proceeds…. b. What “clues” exist in the narratives that distinguish the nature and/or mission of the nonprofit? i. The Ford Foundation has a large pool of investments and/or endowment; income is provided strictly from endowment; capital appreciation is classified as non-operating income; c. How do the “clues” in the narrative “match” the financial information provided in the financial section? i. Column 4 has a large investment category of $6 Billion; Column 4 has no inventory balance since the Ford Foundation only provides grants and no direct services; most of the revenue from Column 4 has been classified as non-operating… this is consistent with the narrative for the Ford Foundation d. CONCLUSION: i. The best match for the Ford Foundation is Column...
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...2006 CASE QUESTIONS DR. KISS Please allow these questions to serve as a guide when you prepare your case write-up in accordance with the syllabus or other instructions. Table of Contents Page Case: Name and Number, Bruner 5e Note Number I. C12- Best Practices—WACC No Questions II. C2- Bill Miller & Value Trust 2 III. C5- Financial Detective, 2005 Contained in Case IV. C7- Body Shop Intl* Contained in Case, but see page 3 V. C6- Krispy Kreme Doughnuts, Inc. 4 VI. C17- The Investment Detective* Contained in Case VII. C28- Intro. to Debt Policy & Value* No Questions, but review M & M Theory on debt and value of the firm. VIII. HBS Case- “Leveraged Betas and the Cost of Equity No Questions IX. C16- The Boeing 7E 7* 5 X. C26- Jet Blue Airways, IPO Valuation* 6 XI.a C35- Merton Electronics 7 XI.b C36- Carefour S. A.* 8 XI.c C44- Palamon Capital Partners* 9 XII. GM Dividend Policy Negotiation (Information to be provided by Dr. Kiss) * Note: Excel Spreadsheets containing some of the exhibits from the case are available for this case at www.mhhe.com/bruner5e FIN 620, CASE QUESTIONS DR. KISS Please allow these questions to serve as a guide when you prepare your case write-up in accordance with the syllabus or other instructions Case 2- Bill Miller & Value Trust Suggested Questions for Your Preparation of the Case. ...
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...CASE STUDY The Investment Detective The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm’s capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital budgeting analyst is necessarily, therefore, a detective who must winnow good evidence from bad. Much of the challenges is knowing what quantitative analysis to generate in the first place. Supposed you are a new capital budgeting analyst for a company considering investments in the eight projects listed in Exhibit 1. The chief financial officer of your company has asked you to rank the projects and recommend the “four best” that the company should accept. Part I For the first part of this assignment only quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive. All projects require the same initial investment, $2,000,000. Moreover, all are believed to be of the same risk class. The weighted average cost of capital for the first part is 10%. To simulate your analysis, consider the following questions: 1. Can you rank the projects simply by inspecting the cash flows? We cannot rank the projects by simply inspecting the cash flows. We must bring all cash flows at the same point in time (present) before...
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...question from Investment Detective Case. Q1. If you have only $8 million for investment (i.e. 4 projects) and your WACC is between 9% and 11%, which projects should you choose and why? You need to justify your answer and show detailed analysis. Your assumptions must be pointed out and should be generally acceptable. (20 points) Answer the following question from Rocky Mountain Advanced Genome case. Q2. Assume that Genome industry will grow at a rate of 4 to 6% in maturity, and discount rate may vary between 18 and 20 %. As a representative of RMAG, What will be your arguments so that Big Sur provides the financing for RMAG? Give at least five reasons in support of your argument. Show all computations in your analysis. (30 points) Answer the following questions from Pressco Inc. case. We worked out a base case of scenario A with no change in tax laws in class. Start with that scenario assumptions as given and answer the following questions. Q3. (Scenario B) What is the net present value of the mechanical drying equipment investment opportunity (as of December 1985) assuming a 12% cost of capital for Paperco and assuming (a) the new tax proposals are enacted, (b) the new drying equipment replaces the old in December 1986, and (c) Paperco signs a binding purchase contract soon enough to be “grandfathered” as to the 8% investment tax credit and the use of ACRS depreciation? (10 points) Q4. (Scenario C) What is the net present value of the investment assuming...
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...To: Dr. Map From: Phe Date: February 16, 2013 RE: Case 18 (The Investment Detective) Projects can be measured by inspecting cash flows alone but there are additional metrics than can be used to make the best recommendations. A brief description of each metric is provided below. * NPV: Net present value is the difference between the present value of the cash inflows and the cash outflows. If the NPV is positive a project should be accepted and if it is negative the project should be rejected. * IRR: Internal rate of return is the discount rate that results in a zero NPV for a project. * PI: Profitability index is equal to the present value of an investments future cash flows divided by its initial cost. A PI greater than one indicates that the present value of the investment’s future cash flows exceeds the cost of making the investment and the investment should be accepted. * PB: The payback period is the number of years of needed to recover the initial cash outlay required to make the investment. * EAC: The cost per year of each project. When completing an analysis, one must be aware of the advantages and disadvantages associated with each metric. NPV has the advantage is that it measures directly the increase in value that the project is expected produce. A possible disadvantage is that it requires an understanding of the time value of money. IRR provides a rate of return metric although there can be multiple rate of returns for projects...
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....الدكتور: ماجد الفرا اسم الطالب: محمد إياد محمد أبودية 202240021 :الرقم الجامعي The controlling : الموضوع What is Controlling Controlling consists of verifying whether everything occurs in conformities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions. Process of Controlling : Process control is extensively used in industry and enables mass production of consistent products from continuously operated processes such as oil refining, paper manufacturing, chemicals, power plants and many others. Process control enables automation, by which a small staff of operating personnel can operate a complex process from a central control room. Types of processes using process control: Processes can be characterized as one or more of the following forms: Discrete – Found in many manufacturing, motion and packaging applications. Robotic assembly, such as that found in automotive production, can be characterized as discrete process control. Most discrete manufacturing involves the production of discrete pieces of .product, such as metal stamping Batch – Some applications require that specific quantities of raw materials be combined...
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...Ethics In Criminal Justice Instructor: Ricky Thompson Date: 9/30/2012 Sir Robert Peel: Community Policing Sir Robert Peel and Community Policing In 1829, Sir Robert Peel created the Metropolitan Police and according to Peel, the real key for policing is the police are the people and the people are the police. Peel believed that prevention of crime could be accomplished without intruding into the lives of citizens. Community policing is based on Peel's concept of prevention. Community policing has been embraced by many law enforcement organizations across our country. Community policing is based on its goal to prevent crime and promote better police-community partnerships. Community policing requires an investment in training with special attention to problem analysis and problem solving, facilitation, community organization; communication, mediation and conflict resolution, resource identification and use, networking and linkages, and cross-cultural competency. Public approval and cooperation is a basis of Sir Robert Peel’s principles of effective policing. Peel stated that the ability of the police to perform their duties is dependent upon public approval of police actions and they must secure the willing co-operation of the public in voluntary observance of the law to be able to secure and maintain the respect of the public. In our diverse society, it is necessary for police to understand the different cultures that make up the communities...
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