Premium Essay

Life Cycle Analysis

In:

Submitted By ninoy
Words 307
Pages 2
WACC Example:

A firm is considering a new project which would be similar in terms of risk to its existing projects. The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand to provide the necessary equity financing for the project. Also, the firm: - has 1,000,000 common shares outstanding - current price $11.25 per share - next year’s dividend expected to be $1 per share - firm estimates dividends will grow at 5% per year after that - flotation costs for new shares would be $0.10 per share - has 150,000 preferred shares outstanding - current price is $9.50 per share - dividend is $0.95 per share - if new preferred are issued, they must be sold at 5% less than the current market price (to ensure they sell) and involve direct flotation costs of $0.25 per share - has a total of $10,000,000 (par value) in debt outstanding. The debt is in the form of bonds with 10 years left to maturity. They pay annual coupons at a coupon rate of 11.3%. Currently, the bonds sell at 106% of par value. Flotation costs for new bonds would equal 6% of par value.

The firm’s tax rate is 40%. What is the appropriate discount rate for the new project?

Solution:

Market value of common = 11.25(1000000) = $11,250,000
Market value of preferred = 9.50(150000) = $1,425,000
Market value of debt = 10000000(1.06) = $10,600,000
Total value of firm = $23,275,000

Cost of common: (Note: floatation costs ignored for common equity because cash on hand is enough to finance the project.) [pic]

Cost of preferred:
[pic]

Cost of debt: Net price = 106% - 6% = 100% of par value Net price = par Therefore, cost of debt = coupon rate r = 11.3%

Therefore:

Similar Documents

Premium Essay

Life Cycle Analysis of Milk

...the well being of both adults and children; this includes calcium, vitamins A, B & D. The history of milk began in the Neolithic age (the new stone age), a time when humans started the transition from hunting and gathering to a more settled way of life. Life Cycle of Milk Supply Chain: Environmental and societal impact of Milk; The dairy industry poses a number of challenges to the health of the environment- * Methane emission- this is release from cows’ during the digestion process either by belching or flatulence. Statistics vary on how much methane an average dairy cow expels on a daily basis. Some experts say 100 liters to 200 liters, while others say it's up to 500 liters a day. This amount of methane is comparable to pollution expelled by a vehicle * Carbon emission- according to studies carried out by the U.S dairy carbon footprint study, it showed that carbon footprint of a gallon of milk is approximately 17.6 pounds of carbon dioxide equivalents. This will usually occur during milk freight and distribution. * Water pollution-Disposal of organic wastes without treatment leads to pollution of water resources hence, causing a rapid growth of microscopic algae that kill fishes and other aquatic life. Furthermore, ammonia released from manure can lease to acid rain causing environmental harm. * Land conversion - The dairy industry is also responsible for majority of land conversion, particularly in the tropics, to grow the feed...

Words: 409 - Pages: 2

Free Essay

The Future of Executive Coaching: Analysis from a Market Life Cycle Approach

...The Future of Executive Coaching: Analysis From a Market Life Cycle Approach Where are we, where are we going, and how do we prepare for what’s next? Sheila Maher, MA., MBA. and Suzi Pomerantz, MT., MCC [This article first appeared in the International Journal of Coaching in Organizations, 2003, 1(2), 3-11. It can be downloaded and printed for personal use only. Please obtain prior written permission for wider printing and d istribution from J ohn L azar, IJCO Co-Executive E ditor, at john@ijco.info .] In launching this journal the editorial board envisioned that the journal would provide a forum for “reflection and analysis…by those leaders of this eme rging field who recogn ize coach ing to be a fixture rather than a fad...” 1 This a rticle exp lores the m arket life cycle o f executive coac hing , considerin g its history and growth, and estimating its current position. We discuss the four stages of the market life cycle: product introduction, market growth, market maturity, and sales decline, exploring the implications for our profession of each stage. Understanding where coaching is in the market cycle allows u s to consider strateg ies to stim ulate the co ntinu ed growth of the pro fession . In this a rticle we present our th esis that “this emerging field” is actually already in the mature stage of its lifecycle and we make recommendations for mo ving the professio n forw ard. It is clear that coac hing is no t a fad an d it is not ne w. Coaching is rooted in a range...

Words: 4580 - Pages: 19

Free Essay

Life Cycle Analysis

...Life Cycle Analysis: 100% Acrylic Latex Paint | Jessica Johanson – Geography 101 (Environmental Geography) | This report focuses on the life cycle of acrylic latex paint, taking the reader through the various stages of production through to disposal. | | Contents Introduction 2 Objectives & Structure 2 Product 2 Paint 3 Raw Material Stage 3 Titanium Dioxide 4 Chloride Process 5 Sulfate Process 5 Water 5 Plastic Acrylic Resin 6 Manufacturing Stage 6 Final Use 7 Disposal Stage 7 Product Care Association 7 Landfill Disposal 8 Conclusion 8 Bibliography 9 CIL Naturaliving Paint 11 Introduction Objectives & Structure This life cycle analysis report is going to acknowledge the environmental and health benefits of using CIL’s naturaliving VOC-free paint, while also shedding light on the effects that its production and distribution have had on the environment. Following the introduction will be a brief overview and history of latex paint. The remainder of the report will be comprised of the life cycle of latex paint, which will walk the reader through the stages of: raw material extraction, manufacturing/production, distribution, final use, and disposal. Product The product chosen for this report is 100% acrylic latex paint, specifically, CIL’s naturaliving, VOC-free paint (for product ad, see Appendix: A). There are two main types of paint currently in production, oil-based (alkyd) and water-based (latex)...

Words: 3627 - Pages: 15

Free Essay

Life Cycle Managment Analysis

...Life Cycle Management Analysis Samantha Puckett Axia College of University of Phoenix Solid marketing strategies are the essential key for many successful businesses. Organizations must organize a marketing department that is responsible for developing the best marketing plan that will advertise their new products in order to inform consumers of their product in the initial introductory phase of selling the product. After consumers are aware of the product, positive word-of-mouth marketing can make boost the product sales. Apple, Inc. designed and marketed today’s most popular portable media player known as an iPod. These MP3 players are devices that allow consumers to shop on a jukebox type website created for iPod users known as iTunes that enables consumers to purchase, download, listen, and watch as they play music, games, videos, and store pictures on their devices. In today’s society, when mentioning MP3 players during a conversation, the first thing that would come to most people’s mind would be an iPod. The introduction stage of promoting the iPod; however, was evidently proven to be unsuccessful. Apple Computer, which is currently known as Apple, Inc., initially set out to revolutionize digital music with the iPod. The company focused on developing a device that was fashionable for all ages as well as men, women, boys, and girls. They did not consider the price of the product, but rather they focused on the quality with better options to their devices as opposed...

Words: 909 - Pages: 4

Premium Essay

Life Cycle Management Analysis

...The marketing objective for the iPod MP3 player is to be the leading supplier of MP3 players in all markets in which the company operates and to increase brand awareness to 60 percent of its customers. iPod’s marketing strategies is differentiated the market for their products are characterized in gender, age, and the desire for image. The Apple iPod is targeted at teenagers and young adults. Music is the essential part of everyone’s life and that is why Apple iPod came out with the MP3 player that is available in attractive colors and accessories. With such a high demand for this product, Apple was able to produce the product as well as other products such as the memory sizes, iPod shuffle, and iPod mini. These iPod items were manufactured into the iPod family that in return Apples customers were able to purchase their needs. Needless to say, this products life cycle has not ended yet, but other companies have followed what has made this product successful for their own products. The Apple Inc. company has managed each stage of the life cycle for this product well, and will continue to do so. The introduction phase of the Apple iPod was the iPod Classic. The iPod Classic was a hard drive based iPod that was first launched in October of 2001. This product was marketed towards the young adults and teenagers. Apple mainly focused on the interface and the ways to capture people’s attention. The iPod interface was sleek and customizable. The product is easy to use for example...

Words: 895 - Pages: 4

Free Essay

Life Cycle Management Analysis of Apple's Ipod

...Life Cycle Management Analysis for Apple’s iPod MKT / 230 September 6, 2009 Life Cycle Management – Page 2 The Apple iPod allows consumers to download music, videos, and various other entertainment items. The iPod can be seen everywhere from the gym to the local coffee shops. Even automakers have started to install iPod outlets in newer vehicles to draw a new kind of consumers to their autos. This report will provide some insight into Apple’s product objectives, marketing strategies, introduction phase, product growth, maturity stage, and decline of product in the market place. Product life cycle typically consists of five main aspects: (1) product development; (2) introduction; (3) growth; (4) maturity; and (5) decline. Various marketing objectives that will help the company achieve the overall product goal are as follows:  Be the leading supplier of MP3 players in all markets in which Apple competes.  Increase product sales.  Increase company revenue.  Increase brand awareness.  Expand distribution to department stores.  Develop a campaign to encourage current users to increase current use of product. Life Cycle Management – Page 3 During the introduction stage, Apple made careful choices with their marketing strategies by paying close attention to pricing, promotional and placement decisions. The introduction of the iPod transformed Apple into an entertainment giant. Apple’s approach to introducing the iPod to consumers was geared more towards...

Words: 914 - Pages: 4

Premium Essay

Project Life Cycle: The Greenwich Lane: Project Analysis

...Monday, November 16 2014 Professor Anne Marie Sowder New York City College of Technology, CUNY Project Life Cycle: The Greenwich lane Part 1: Site history Part 2: Project Design Part3: Project Construction Part4: Project Analysis Moustapha Sylla CMCE -1220 Site History The Greenwich Lane Condos and Townhouses is a composition of five unique address located at 160-150-140 West 12 street and 155-145 west 11 street in Manhattan. The site was previously used as the St Vincent’s hospital. The Saint Vincent Hospital was founded in 1849 by the sisters of charity to response in New...

Words: 1047 - Pages: 5

Free Essay

Pdf Hrbrid Car

...fleet, three scenarios of introduction of 10–30% fuel cell vehicles including plug-in hybrids configurations were analysed. Considering the scenarios of increasing hydrogen based vehicles penetration, up to 10% life cycle energy consumption reduction can be obtained if hydrogen from centralized natural gas reforming is considered. Full life cycle CO2 emissions can also be reduced up to 20% in these scenarios, while local pollutants reach up to 85% reductions. For the purpose of estimating road vehicle technologies energy consumption and CO2 emissions in a full life cycle perspective, fuel cell, conventional full hybrids and hybrid plug-in technologies were considered with diesel, gasoline, hydrogen and biofuel blends. Energy consumption values were estimated in a real road driving cycle and with ADVISOR software. Materials cradle-to-grave life cycle was estimated using GREET database adapted to Europe electric mix. The main conclusions on CO2 full life cycle analysis is that lightduty vehicles using fuel cell propulsion technology are highly dependent on hydrogen production pathway. The worst scenario for the current Portuguese and European electric mix is hydrogen produced from on-site electrolysis (in the refuelling stations). In this case full life cycle CO2 is 270 g/km against 190 g/km for conventional Diesel vehicle, for a typical 150,000 km...

Words: 302 - Pages: 2

Premium Essay

Adm Processor

...Abstract The AMD Fusion Family of Accelerated Processing Units (APUs), introduced to market in January 2011, is a new generation of processors that combines the computing processing unit (CPU) and graphics processing unit (GPU) capabilities in a single chip (die). APU-based platforms can deliver a prodigious amount of computational horsepower, and can present enormous opportunities in developing an application ecosystem beyond today’s mainstream computer systems. While APUs seek to deliver a superior, immersive PC experience, they also can provide tangible environmental benefits. By eliminating a chip to chip link and by introducing new holistic power management techniques, the APUs are designed to be more power efficient than current generation platforms that have both computational and graphical capabilities. This paper compares the environmental impact of one of AMD’s first APU products against an equivalent computer platform powered by the current generation of AMD processors (CPUs and GPUs). By conducting a business to consumer (B2C) lifecycle assessment, this study compares the total lifecycle greenhouse gas (GHG) emissions (also known as a “carbon footprint”) of an APU system (based on the 18W dual-core processor codenamed “Zacate” and the M1 chipset codenamed “Hudson”) with the latest AMD system codenamed “Nile” (which is based on an AMD Athlon™ Neo II Dual Core processor, SB820 Southbridge, RS880M Northbridge with an ATI Mobility Radeon™ HD 5430 discrete graphics...

Words: 3600 - Pages: 15

Free Essay

Lca of Nissan

...Individual Assignment 2: LCA of two products Life Cycle Assessment of Nissan Cars *ASR: Automobile Shredder Residue. ASR is what remains after material recycling is done to recover as much ferrous and non-ferrous metallic material as possible from the automobile shredder residue. Nissan conducted LCAs since the early 1990s, and made quantitative comparisons to understand the environmental impact of materials that were changed in the following parts. * Radiators * Air conditioners * Front-end modules * Back doors Based on the results of the LCA Project carried out by the LCA Committee of the Japan Automobile Manufacturers Association from October 1997 to March 2001, Nissan reviewed in-house LCA methods and calculated results for major models. * May 2005: Inventory analysis was certified as being in accordance with the LCA method stipulated in JIS Q14040 by the Japan Environmental Management Association for Industry. Models that have undergone LCA: Skyline (made in Japan), Dualis (made in England) To develop more environmentally-friendly vehicles, LCAs are also conducted for new technologies that are introduced. These results are used to achieve the goals set out in the Nissan Green Program 2010* and the Nissan QCT-C* management policy, which clarify our environmental efforts. * *Nissan Green Program 2010: An environmental program that establishes activity plans and specific numerical targets for Nissan to...

Words: 1239 - Pages: 5

Free Essay

Later

...3 Case study on Plastics : PET Bottle Life Cycle of Plastics Crude Oil Polymer Product Use Waste Recovery Polymer Product Use Overview of PET bottle recycling Containers and Packaging Recycling Law Specified business entities Fiber Industry (wash, crash, melt, spin) Bottle Industry Obligation to recycle Local governments (deporimerization) Consumers Selective collection and storage Selective discarding Players Producers n n n n Plant designers Product designers Energy suppliers Related industrial sectors Consumers Municipal and governmental authorities Waste treatment agencies Role of KIH ‘configuration engine’ To inform players of their role in life cycle as a stakeholder To accumulate knowledge/information of life cycle from information suppliers To interpret massive life cycle data with transparency for rational decision making 1. 2. 3. Overview of PET bottle recycling Containers and Packaging Recycling Law Specified business entities Fiber Industry (wash, crash, melt, spin) Bottle Industry Obligation to recycle Local governments (deporimerization) Consumers Selective collection and storage Selective discarding Objective of this case study To develop a ‘configuration engine’, which takes LCA as an environmental metric concurrently with an economic metric, for chemical process designer, To clarify steps, tools and information in a form of business-model. To show actual design...

Words: 1378 - Pages: 6

Premium Essay

Costing Systems

...Costing Systems 2 Identifying the full range of sustainability impacts a vital stage in better decision making. A number of companies have begun the transition to improved social and environmental cost accounting using methodologies such as activity-based costing (ABC), life-cycle assessment (LCA), and full cost accounting (FCA) (Epstein, 2008). ABC assumes that activities related to products, services, and customers cause the costs. ABC first assigns costs to the activities performed by the organization (direct labor, employee training, regulatory compliance) and then attributes these costs to products, customers, and services based on a cause-and-effect relationship (Epstein, 2008) The main advantages of ABC include an assessment of costs of individual activities, based on their use of resources; accurate costing of activities to be obtained throughout an organization; ease of identification where high (and low) costs are being incurred (and the cause), and serving as a valuable tool for both business and process improvement. It also helps with future product planning; ie: the cost of all activities associated with a product or service can be accurately determined before it is launched. This can then help with determining pricing, and any associated expenditure. However there are disadvantages to ABC as well. It may be difficult to set up or establish, particularly if an organization is using more traditional accounting methodologies. It can be time consuming if...

Words: 879 - Pages: 4

Free Essay

Management

...FedEx and the Life-Cycle Cost Embry-Riddle University Worldwide MGMT 422 Stephen Walker 26 January 2013 By Ahmadou Diallo Abstract Life cycle cost LCC is a management accounting tool used is a method for assessing the total cost of system from costs of acquiring, owning, and disposing of it. This methodology is essential in predicting cost-effective solutions though it not guaranteeing a particular result; therefore allowing the firm initiate rational comparison between alternative solutions. Introduction Life Cycle Cost (LCC) is the total lifespan cost incurred by an organization in purchasing, installing, operating, maintaining, and disposing off any equipment used in daily operations of the firm. In regard to this, estimation of LCC encompasses using a particular approach in identifying and quantifying components of an LCC equation (Pehnt, 2006). The use of LCC as an assessment tool when selecting possible design alternatives results in the provision of a cost-effective solution within limits of available data. In addition, a standard LCC comprises initial and operation costs, installation and commissioning costs, energy costs as well as disposal costs among others. System Requirements The management of FedEx gives particular emphasis on the initial purchasing and installation cost of new systems. In line with this, the firm’s top managers are supposed to explain LCC of various solutions prior to the installation of new equipment. The initiation of strong LCC...

Words: 2271 - Pages: 10

Free Essay

Starch Products

...Life Cycle Assessment study of starch products for the European starch industry association (AAF): sector study Vercalsteren An, Dils Evelien, Boonen Katrien Study accomplished under the authority of the European starch industry association (AAF) 2011/TEM/R/104 August 2012 All rights, amongst which the copyright, on the materials described in this document rest with the Flemish Institute for Technological Research NV (“VITO”), Boeretang 200, BE-2400 Mol, Register of Legal Entities VAT BE 0244.195.916. Table of Contents TABLE OF CONTENTS Table of Contents ________________________________________________________________ 3 List of Figures ___________________________________________________________________ 4 List of Tables ____________________________________________________________________ 5 CHAPTER 1 CHAPTER 2 2.1. 2.2. 2.3. Introduction ________________________________________________________ 7 Definition of goal and scope ___________________________________________ 9 9 9 10 Introduction Goal definition Scope definition CHAPTER 3 CHAPTER 4 4.1. Life cycle data inventory _____________________________________________ 15 life cycle impact assessment __________________________________________ 19 19 LCIA methodology 4.2. Environmental profiles of starch products 20 4.2.1. Environmental profile of native starches _________________________________ 20 4.2.2. Environmental profile of liquid glucose (including Glucose and Fructose syrups) __ 20 4.3. Carbon...

Words: 6841 - Pages: 28

Premium Essay

Case on New Product Launch

...brands at present Why Launch now Why Launch now * Higher Profit Margin due to reduction in manufacturing cost * Reduced Lead time ; Better Forecasting ; Lower Inventory * Higher Profit Margin due to reduction in manufacturing cost * Reduced Lead time ; Better Forecasting ; Lower Inventory Cheaper than competitors even if imported with 50% margin Cheaper than competitors even if imported with 50% margin * As ‘Launch now‘ has greater benefits than ‘Wait for in-house Mfg’ * Thus, Launch the Product Now and build In-house Mfg. Capability parallely * As ‘Launch now‘ has greater benefits than ‘Wait for in-house Mfg’ * Thus, Launch the Product Now and build In-house Mfg. Capability parallely Cost Analysis Cost Analysis Why Wait for In-house Mfg. Why Wait for In-house Mfg. > > * High Failure rate for new products- ranging from 60-90%; Hence, company has to be careful in expansion of its distribution channel * Due to high Cost & low demand → DPA is very Important * High variability of demand in Pan India...

Words: 562 - Pages: 3