highest positive NPV rates based on the financial analysis. The discussion analysis comprises IRR, discounted rate, hurdles rate, cash flow, inflation and interest rate for the sole purpose of investment returns. As observed the scope management plan is overall good. Recommendation for improvement on report and tracking performance can be enhanced in avoiding delay and mitigate risk. Also, various financial methods has been used to determine quick cash flow returns. Calculation on NPV is the best recommendation
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CASE 90: Northern Forest Products | Topic: Cost of Capital | Instructor: Dr. BILICI and Dr. Tran Phi Long | GROUP 11: Nguyễn Diệp An Hoàng Tiến Nhật Anh Phạm Nguyên Hạnh Đỗ Quang Huy Nguyễn Hoàng Long Nguyễn Phương Thủy Phạm Anh Thư Phan Thị Thu Trang Nguyễn Đức Trung Vũ Thị Minh Tú NOTHERN FOREST PRODUCT CASE STUDY Question 1: Explain the importance of risk adjustment in the capital budgeting allocation process by answering the following questions. a. Explain why risk adjustments
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importance of investment decisions Explain the methods of calculating net present value (NPV) and internal rate of return (IRR) Show the implications of net present value (NPV) and internal rate of return (IRR) Describe the non-DCF evaluation criteria: payback and accounting rate of return Illustrate the computation of the discounted payback Compare and contrast NPV and IRR and emphasize the superiority of NPV rule 12/24/2012 Prof.Dr. Anuj Verma 3 Nature of Investment Decisions The investment
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of analysis includes identification of the relevant cash flows and evaluation of impact on Earnings per Share (EPS), payback period, Discounted cash flow (NPV analysis) and Internal Rate of Return (IRR), with respect to benchmark investment criteria for similar engineering-efficiency projects. The results provide a comparatively better NPV, IRR, payback period, and average annual addition to EPS. Since all four investment criteria are
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3582.1 1 ⋅ 1 − = 322,657 120 0.005 (1.005) . 322,657 EMBA © 10 5 ¯ (NPV) (IRR) 11 EMBA © " -NPV ?Net Present Value (NPV) - ( " ) ¯ ¯ .(0 ) , ¯ " " ¯ . , ( , ) ¯ ¯ ¯ ¯ 0 ¯ .0 : 12 EMBA © • • • ¯ • 6 " -NPV 100 ?2% PMT=100 – r = 2% – N=20 – PV=1,635.14 ¯ – (NPV) ¯ • ? 1500 NPV=PV-I=1635.14-1500=135.14 • NPV ¯ ¯ • ! ¯ 13 EMBA © ¯, (PV) ¯ 20 • " -NPV NPV?3% - 2% : PMT=100 r =3% N=20 PV=1,487.75 ¯
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Compute the NPV of both projects. Which would you recommend? What if they are not mutually exclusive? NPVMMDC = 7,150 NPVDYOD = 7,298 Based solely on the NPV analysis we would suggest to implement the DYOD project as it has a higher NPV. If both projects weren’t mutually exclusive, we would suggest implementing both as both have a positive NPV. 3. Compute IRR and payback period for both projects. Based on each criterion, which project would you recommend? If this differs from NPV analysis
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[pic] SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT AFIN 209 - CORPORATE FINANCE AND FINACIAL MODELLING MID TERM EXAMINATION SEPTEMBER 2012 Time allowed: 3 HOURS plus 5minutes reading time Instructions to Candidates: 1. Check that you have the correct examination in front of you. 2. There are SIX (6) questions in this paper. Answer FOUR (4) questions. 3. All questions must be answered on the answer sheet only. 4. Begin each question on a new page. 5.
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CAPITAL BUDGETING DECISION 1. Meaning Capital budgeting denotes situation where funds are invested immediately and returns are expected after a year. In growing orgnisation capital budgeting is more or less continuous process and it is carried out by top management. The role of any Finance Manager is to critically evaluate proposal, evaluation of alternative proposal and select best one. The following are the some of the cases where heavy capital investment may be necessary. A) Replacement
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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
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Fin 221 Fall 2006 Exam 4 Multiple Choice Identify the choice that best completes the statement or answers the question. 1) Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. The bond currently sells for $900.90, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? A. 5.40% B. 5.73% C. 5.98% D. 6.09% E. 6.24% 2) Assume that Mary Brown
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