Financial Management (BUSI 640) Professor Faulkender Investment Detective Case Questions The purpose of this case is to practice 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
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Financial Functions Using Microsoft Excel FV | PV | RATE | NPV | IRR | PMT | Printing Formulas | FV FV(rate,nper,pmt,pv,type) Rate is the interest rate per period. Nper is the total number of payment periods in an annuity. Pmt is the payment made each period; it cannot change over the life of the annuity. Pmt must be entered as a negative number. Pv is the present value, or the lump-sum amount that a series of future payments is worth right now. If pv is omitted, it is assumed
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Alexander Barnett F455 Final Exam 10/27/14 321 West 44th Street, straddling Midtown and the Lower Manhattan, this property is a great location in New York City, close to the world famous Times Square. There is a new movement of tech start-ups moving to the “Silicon Alley” area, the entrepreneurial bubble that emulates California’s Silicon Valley, noted the Green Oak presenter. This location is a great buy with flexible floor plans and a lot of “creative space”. Recently there have been major
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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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of capital for Pan-Europa’s proposed projects. Taking this data into consideration, the ‘Strategic Acquisition’ project scored the highest ranking above all other projects due to its 47.97 WACC rating, NPV at minimum rate of return of 41.43 and an IRR of 28.7%. Project No. 11 7 8 9 4 10 2 3 5 1 6 Project Name Strategic Acquisition Eastward Expansion Southward Expansion Snack Foods Artificial Sweetener Inventory Control System New Plant Expanded Plant Automation & Conveyor System Expand Truck
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Case 3: Diamond Chemicals Diamond Chemicals operates two large polypropylene production plants, the Merseyside Works in England, and the other in Rotterdam, Holland. Diamond Chemicals’ plant manager Lucy Morris is currently examining a (British Pounds) 9 Million project to improve the plant, which has been under scrutiny for poor financial performance. Morris has assumed the responsibility of Merseyside Works, and has decided improvements need to be made. Although there is room for substantial
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given STC’s proven earning growth and strong market position, along with significant opportunity for cost reduction. We conducted financial valuation using market comparison method. The purchase price is between 2,653 million and 3,243 million. The IRR of the project is 28% when exiting by the end of 5th year. Overall this project will generate steady growth with great upside potential and low company-wide or industry-wide risks. We will dive into the details of analyses in the sections followed.
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identify the amount, the time value, and the risk factor of a project’s cash flows (Baker, 2011). Four of the more popular and most useful techniques that this paper will focus on are payback period, net present value (NPV), internal rate of return (IRR), and profitability index (IP). The first of the four techniques to review is the payback period method. Referred to as the “breakeven” point, the payback period technique is known as the simplest of the four as its only consideration is the length
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What is the Internal Rate of Return (IRR) of this project? The internal rate of return is the rate that would make the net present value of the firm’s project equal to zero. In other words, the IRR is the rate that would make the decision of investing or not in this project indifferent for the company. In order to calculate the IRR we started by computing the Free Cash Flows (FCF) for every single year. Once we got all the FCF, we calculated the IRR discounting them by the rate that would
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