...TermPaperWarehouse.com - Free Term Papers, Essays and Research Documents The Research Paper Factory Join Search Browse Saved Papers Search Home Page » Business and Management Mini Case - Mckenzie Corporation's Capital Budgeting In: Business and Management Mini Case - Mckenzie Corporation's Capital Budgeting CFEA3230 Advanced Managerial Finance individual assignment: MINI CASE - McKENZIE CORPORATION'S CAPITAL BUDGETING Prepared by :- RUBBIATUN ARDAWIYAH bt ABDUL HAMID CEA 080147 Prepared for:- Profesor Madya Dr. Rubi Binti Ahmad Date of submission :- 25 april 2012 MINI CASE - McKENZIE CORPORATION'S CAPITAL BUDGETING Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thorton, the company's CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the company's expansion and determined that the success of the new restaurants will depend critically on the state of the economy next year and over the next few years. McKenzie currently has a bond issue outstanding with a face value of $34 million that is due in one year. Covenants associated with this bond issue prohibit the issuance of any additional debt. This restriction means that the expansion will be entirely financed with equity, at a cost of $8.4 million. Sally has summarized her analysis in the following table, which shows...
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...CORPORATE FINANCE CBEB3104 Individual report: Mini case (McKENZIE CORPORATION’S CAPITAL BUDGETING) Name: amna Mohamed ali yusuf almezaal Matric number: SER090706 1. What is the expected value of the company in one year, with and without expansion? Would the company’s stockholders be better off with or without expansion? Why? E(expansion) = ∑ ( probability × value of the company) E(without expansion) = (0.3×30,000,000) + (0.5×35,000,000) + (0.2×51,000,000) = $ 36,700,000 E(with expansion) = (0.3×33,000,000) + (0.5×46,000,000) + (0.2×64,000,000) = $ 45,700,000 – $ 8,400,000 ($ 8.4 million financing cost) = $ 37,300,000 ஃ expansion is a better option for the shareholder’s since the value of expansion ($37,300,000) is $ 600,000 dollars higher than the value without expansion ($36,700,000) 2. What is the expected value of the company’s debt in one year, with and without the expansion? - value of debt without expansion = (0.3× 30,000,000) +(0.5× 34,000,000) + (0.2×34,000,000) = $32,800,000 - value of debt with expansion = (0.3× 33,000,000) + (0.5× 34,000,000) +(0.2×34,000,000) = $33,700,000 OR The expected value of debt will be the same amount because the expansion would be financed with equity. 3. One year from now, how much value creation is expected from the expansion? How much value is expected for stockholders? Bondholders? - From question one, the value creation from expansion = $600,000 - Expected value for stockholders...
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...Management Goals | 14 | | Do Managers Act in the Stockholders' Interests? | 14 | | Stakeholders | 15 | 1.6 | Regulation | 16 | | The Securities Act of 1933 and the Securities Exchange Act of 1934 | 16 | | Sarbanes-Oxley | 17 | | Summary and Conclusions | 18 | | Concept Questions | 18 | | S&P Problems | 19 | 2 Financial Statements and Cash Flow 20 2.1 | The Balance Sheet | 20 | | Liquidity | 21 | | Debt versus Equity | 22 | | Value versus Cost | 22 | 2.2 | The Income Statement | 23 | | Generally Accepted Accounting Principles | 24 | | Noncash Items | 25 | | Time and Costs | 25 | 2.3 | Taxes | 26 | | Corporate Tax Rates | 26 | | Average versus Marginal Tax Rates | 26 | 2.4 | Net Working Capital | 28 | 2.5 | Financial Cash Flow | 28 | 2.6 | The Accounting Statement of Cash Flows | 32 | | Cash Flow from Operating Activities | 32 | | Cash Flow from Investing Activities | 32 | | Cash Flow from Financing Activities | 33 |...
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...deviates from a linear programming formulation, then it is an integer programming (IP) problem. (The more complete name is integer linear programming, but the adjective linear normally is dropped except when this problem is contrasted with the more esoteric integer nonlinear programming problem, which is beyond the scope of this book.) The mathematical model for integer programming is the linear programming model (see Sec. 3.2) with the one additional restriction that the variables must have integer values. If only some of the variables are required to have integer values (so the divisibility assumption holds for the rest), this model is referred to as mixed integer programming (MIP). When distinguishing the all-integer problem from this mixed case, we call the former pure integer programming. For example, the Wyndor Glass Co. problem presented in Sec. 3.1 actually would have been an IP problem if the two decision variables x1 and x2 had represented the total number of units to be produced of products 1 and 2, respectively, instead of the production rates. Because both products (glass doors and wood-framed windows) necessarily come in whole units, x1 and x2 would have to be restricted to integer values. Another example of an IP problem is provided by the prize-winning OR study...
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...10/29/03 2:20 PM Page ii 3122-prelims.qxd 10/29/03 2:20 PM Page iii second edition International Human Resource Management edited by A n n e - Wi l H a r z i n g J o r i s Va n R u y s s e v e l d t SAGE Publications London l Thousand Oaks l New Delhi 3122-prelims.qxd 10/29/03 2:20 PM Page iv © Anne-Wil Harzing and Joris van Ruysseveldt, 2004 First published 2004 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted in any form, or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers. SAGE Publications Ltd 1 Olivers Yard London EC1Y 1SP SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320 SAGE Publications India Pvt Ltd B-42, Panchsheel Enclave Post Box 4109 New Delhi 100 017 British Library Cataloguing in Publication data A catalogue record for this book is available from the British Library ISBN 0 7619 4039 1 ISBN 0 7619 4040 5 (pbk) Library of Congress Control Number available Typeset by C&M Digitals (P) Ltd., Chennai, India Printed in Great Britain by The Cromwell Press Ltd...
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