222016 KHAIRUNNISA BT AHMAD DAMANHURI 222411 Table of Contents What is the basic nature of the problem in this case? 1 Base-case Units Assumptions 3 Cash Flow- License 5 Working Capital - Own 6 Working Capital - License 6 Incremental NPV and IRR Sensitivity to Total Units Sold 7 What do the result of the foregoing DCF analysis suggest? 8 Are there qualitative issues that we should address, but which are not reflected in the DCF analysis? 11 Question 1: What is the basic nature
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Finance Individual Assignment Q1) For the NPV accounting method, the advantages are, firstly, it considers the time value of money, it will discount the cash flows properly in order compare different cash flow and make correct decision. Secondly, it use cash flows and also all the cash flows of the project will be considered. Also, it will consider the risk of future cash flows through the cost of capital. However, as an investment criterion, NPV wholly excludes the value of any real options that
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5100) = $17,508.71 - $17,100 = $408.71 (=IRR: -17100, 5100, 5100, 5100, 5100, 5100) = 14.99% (=MIRR: -17100, 5100, 5100, 5100, 5100, 5100, 14%, 14%) = 14.54% → Accept the decision. Pulley System: (=NPV: 14%, 7500, 7500, 7500, 7500, 7500) = $25,748.11 – $22,430 = $3,318.11 (=IRR: -22430, 7500, 7500, 7500, 7500, 7500) = 19.99% → 20% (=MIRR: -22430, 7500, 7500, 7500, 7500, 7500, 14%, 14%) = 17.19% → Accept the decision. 10-9 Electric Truck: (=NPV: 12%, 6290, 6290, 6290, 6290, 6290, 6290)
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ACCT505 Capital Budgeting problem Clark Paints Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Initial working capital $0 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Initial training costs 0 Number of workers needed 3 Annual hours to be worked per employee 2,000 Earnings per hour for
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February 29th 16 February 29th 16 PEM 6 – Evaluation of Projects – Case Study PEM 6 – Evaluation of Projects – Case Study Economic Assessment Rebecca Schauer & Simón Ucrós [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] Economic Assessment Rebecca Schauer & Simón Ucrós [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] 08 Fall 08 Fall
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Part I As per request to analyze which Network to be selected, this report is to provide the reasons why Network I is better. Before finalize the decision to select between Network I and Network II, there are three steps: 1. The forecasted net cash flow derived for both Network 2. Techniques use to evaluate Networks 3. Final decision to accept Network I 1. Forecasting cash flow for both Networks As attached in Appendix I, to get free cash flow for these two projects, there are
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Linn purchase the $39M capsize? Hong Kong or the U.S? (Ocean Carriers uses a 9% discount rate.) To analyze these two scenarios, we choose to calculate net cash flow and IRR for every year. The detail calculation is attached in the appendix and the methodology of this approach is enlisted as below. Formula for NPV, IRR calculation 1. Gross operating revenue = Expected daily hire rate X Number of days operating 2. EBIT = Gross operating revenue – Yearly operating costs – Total depreciation
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estimating the value created from taking on different projects and how those values change given differences in rates of return and project duration. We will look at different ways of evaluating capital budgeting decisions and see why Net Present Value (NPV) generates better decisions than other methods. Ignore the questions provided in the case itself. the Return on Investment (Excess of cash flow over initial investment divided by the initial investment). |No. |Project
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1st Scenario MINI-CASE ABC CORPORATION The initial cash outlay at Time 0 is simply the cost of the new equipment, $15,000,000 and the ABC’s required return of 12 percent. The marketing study and the research and Development is both sunk costs and should be ignored. (Assuming CCA class is 43, the CCA rate of 30 percent and corporate tax is 35 percent). Sales Sales VC Fixed costs Year 1 $17,500,000 6,020,000 3,000,000 Year 2 $20,000,000 6,880,000 3,000,000 Year 3 $25,000,000 8,600,000 3,000
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Notes: FIN 303 Spring 09, Part 7 – Capital Budgeting Professor James P. Dow, Jr. Part 7. Capital Budgeting What is Capital Budgeting? Nancy Garcia and Digital Solutions Digital Solutions, a software development house, is considering a number of new projects, including a joint venture with another company. Digital Solutions would provide the software expertise to do the development, while the other company, American Financial Consultants (AFC) would be responsible for the marketing. Nancy Garcia
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