percent compounded monthly 2800/(1+ 0.049/12)12x3 =2800/1.157993 = 2417.98 5.2 percent compounded quarterly 2800/(1 + 0.052/4)4x3 =2800/1.167652 = 2397.97 5.4 percent compounded annually 2800/(1.054)3 = 2391.31 Present value with multiple cash flows: Saul Cervantes has just purchased some equipment for his landscaping business. He plans to pay the following amounts at the end of the next five years: $9,944, $8,670, $12,320, $8,790, and $13,552. If he uses a discount rate of 5.216 percent
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is 10% and the tax rate is zero. |Year |0 |1 |2 |3 | |Machine A’s Cash Flows |-500 |-150 |-150 |-150 | |Machine B’s Cash Flows |-650 |-100 |-100 |-100 | |Machine A’s EAC |-438.10
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benefits that the company will incur after this project implementation are as follows: * Inventory reduction (one-time, non-taxable): when you reduce inventory; it is similar to sell off some of inventory for cash, and brings the firm cash inflow. (but it is a one-time event; cash flow will turn to zero when inventory reduces to its target level) * Additional sales units due to product availability- which is ,persistent and taxable * Increased margin. (persistent and taxable) *
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products. The cash flow forecast predicts that 1996 sales, $28,206, will increase to $33,847 for 1997. For every dollar of this increase, $1056.44 net investment in working capital is needed. This investment is used to support higher sales in 1997. Under this set of assumptions, Tire City has excess cash of $273.31 at the end of 1996 given management decides not to create any decision cash flows. This is very unrealistic that management will not take on any decision cash flows. This
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Installing new modern telecommunication will provide wide range of options. Options include conference call and automated call responses. Installing new electronic cash registers connected to the company network will help keep track of inventory par levels. Electronic cash register will increase productivity and is easy to use. The use of a new cash register will track of inventory allowing accurate ordering of supplies. “AccuBar is a sophisticated
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SEELKE RE: DECISION ON CAPE SIZE CARRIER PRIORITY: Ms Mary Linn, After careful cash flow analysis and a discount rate (WACC) of 9%, commissioning a capsize carrier for 25 years is the only appropriate option for our firm. However, if the discount were instead 10%, both options would fail the NPV test by yielding negative results. I make this recommendation after thorough analysis of estimated cash flow and with the desire that our required 15-year life span will be amended. With
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Question 7-1 Why is the income approach to value often difficult to use on a single family residential appraisal? Typically, the income approach is difficult to use because the sale of single family, rental properties are rare in the area. Question 7-2 What are the differences between the cost and sales comparison approaches to appraising property? When using the market approach, the appraiser estimates the value of a property by comparing the selling prices of properties
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Q2: Relevant Cash Flows. The new product line sales are: 23,000 * $19,000 = $437,000,000 Boost in sales of the existing motor homes, since the new product line will be introduced: 2,600 * $73,000 = $189,800,000 – relevant. Reduced sales of its luxury motor coach sales due to the new product line, thus: 850 * $115,000 = $97,750,000 – relevant. The annual sales figure to use in evaluating this project: Net sales = $437,000,000 + $189,800,000 – $97,750,000 Net sales = $529,050,000 Q9: Calculating
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another o Be able to explain why this is necessary o Continuous compounding is NOT covered • Aligning cash flows (Big, ugly nasty problems like Jordan Ch 6, Q 57 “Bilbo” or Jaffe Ch 4, Q 52) o For example, a generic set-up might look like: ▪ FV(A) + FVA(B) = PVA (C) + PV(D) when the equals sign “occurs” at the time when the cash flows change direction (i.e. at the time of retirement, or the start of college). o Examples 4.22 – 4.25 (pages 242-244)
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| |Total Cost | $ 255,000 | CASH BUDGET | |Q1 |Q2 |Q3 |Q4 | |Beginning cash balance |$935 |$891 |$928 |$895
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