company is considering a new project. The company’s CFO plans to calculate the project’s NPV by discounting the relevant cash flows (which include the initial up-front costs, the operating cash flows, and the terminal cash flows) at the company’s cost of capital (WACC). Which of the following factors should the CFO include when estimating the relevant cash flows? a. Any sunk costs associated with the project. b. Any interest expenses associated with the project. c. Any opportunity costs associated
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1. Discuss the difference between – State also advantages & disadvantages each: a. The payback period & the discounted payback period criteria of capital budgeting. The payback period measures the time that it takes to recoup the cost of the investment. If the cash flows are an annuity, then we can simply divide the cost by the annual cash flow to determine the payback period Otherwise, as in the example, we subtract the cash flows from the cost until the remainder is zero
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Structured Financing Techniques in Oil and Gas Project Fina.nce Future-Flow Securitizations, Prepaids, Volumetric Production Payments, and Project Finance Collateralized Debt Obligations Christopher L. Culp and J. Paul Forrester* I. INTRODUCTION Project finance is the extension of credit to finance an economic unit where the future cash flows of that unit serve as collateral for the loan. By facilitating the separation of project assets from the sponsor and enabling the financing
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Capital Project Name: Institution: It is on record that companies and organizations in different industries invest massive resources in their specific lines of operation in order to survive in their respective industries, maintain market shares, and continue to provide quality products or services together with generating more income. Specifically, organizations in the health care sector often invest in capital projects that are aimed at attaining
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Project Management Section A Part One: 1. Liquidation value of the firm’s assets could be considered as … a. The minimum wealth of shareholders 2. If ‘P’ be the initial investment, ‘I’ be the interest rate and ‘T’ be the time period for which funds are invested then interest earned will be … d. P*I*T 3. Following the above given conditions, compound interest is given by … b. P*(1+I)T 4. Firms resorting to “Proactive Growth” a. do constant strategic
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financing options to purchase an equipment for Amtrak’s new train service, Acela. Acela is a new high speed rail service that will service the Northeast Corridor, which serves routes from Virginia to Maine. Congress passed the Amtrak Reform and Accountability Act (ARAA), which prevents Amtrak from using federal funds for operating expenses after 2002. By 2002, Acela is estimated to generate $180 million in revenues and consequently making Amtrak a self-sustaining company. The project requires $267.9 million
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t i=1 5000/(1+IRR)t = 11.49% Rainbow Products should not purchase the machine because it is not profitable whether you utilize the NPV method or the IRR method. By NPV method, project should be rejected because it has a negative NPV of $945.68. By IRR method, the project should be rejected because the IRR is less than cost of capital for the investment. 1.b) The Perpetuity formula to calculate PV = Cash Flow per Year/Cost of Capital PV=C/r = 4500/.12 = $ 37,500. NPV= PV – Initial investment
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[pic] [pic] Bangladesh is one of the largest Muslim countries of the world. The people of this country are deeply committed to Islamic way of Life as it is mentioned in Quran and Sunnah. But it is not possible for the people to establish and design their economic lives in accordance with Shariah. The very objective of Shariah is to promote the welfare of the people that lies in safeguarding their faith, their life, their posterity and their wealth. In this regard to establish a banking world
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range of projects is which method(s) of Capital Budgeting a company will opt for in order to arrive at the final proposed solution. “Investment decisions must be consistent with the objectives of the particular business. For a private sector business, maximising the wealth of the owners (shareholders) is usually assumed to be the key financial objective.” (Atrill and McLaney, 2009, p. 259) As a company exists primarily to increase the wealth of the stakeholders it should only invest capital to implement
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0BAFI Business Finance Exam Solutions Semester 3 2010 Section B Q. 1 Explain in simple terms what you would need to know and how you would go about determining the interest and principal components of a loan repayment. To determine the interest and principal components of a loan repayment you would need to know the following: Present value (PV) – the amount outstanding on the loan, r – the discount or interest rate applicable to the loan, n – the number of payments to be made on the loan
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